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March:April 2016 PDF
MARCH/APRIL 2016
F O R E I G N A F F A I R S .C O M
Intelligence, Surveillance & Reconnaissance
Network Systems
Secure Communications
Middle-Class Heroes 25
The Best Guarantee of Good Governance
Nancy Birdsall
Is Innovation Over? 42
The Case Against Pessimism
Tyler Cowen
March/April 2016
I N T E R N A T I O N A L M O N E T A R Y F U N D
Inequality and
Fiscal Policy
edited by Benedict Clements,
Ruud de Mooij, Sanjeev Gupta, and
Michael Keen
Imfbookstore.org/fama6
Learning to Love Stagnation 47
Growth Isn’t Everything—Just Ask Japan
Zachary Karabell
ESSAYS
Fight or Flight 62
America’s Choice in the Middle East
Kenneth M. Pollack
ON FOREIGNAFFAIRS.COM
Kelly Greenhill on Michael Kazin on Michael Levi on the
demographic bombing. Donald Trump. geopolitics of cheap gas.
March/April 2016
Photo by Jeff Goldberg/Esto
Japan’s New Realism 125
Abe Gets Tough
Michael Auslin
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March/April 2016 · Volume 95, Number 2
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CONTRIBUTORS
The son of two economists and the nephew of two Nobel
laureates in economics, LAWRENCE SUMMERS seemed
destined from birth to become an economist. And indeed,
after a short stint as a physics major at MIT, he soon
switched to “the dismal science,” gaining tenure at Harvard
at 28. Since then, he has served as chief economist at the
World Bank, U.S. treasury secretary, president of Harvard,
and director of President Barack Obama’s National Eco-
nomic Council. In “The Age of Secular Stagnation” (page 2),
Summers argues that governments must increase public
investment to address the root causes of slow global growth.
T
he first decade of the twenty-first population growth around the world.
century was a time of unprec- Nancy Birdsall warns that slow growth
edented economic growth. The won’t just hurt businesses and investors but
rich world got richer, and the developing could also end one of the most important
world raced ahead: by 2007, the emerging- developments of the last three decades:
market growth rate had hit 8.7 percent, the steady rise of a global middle class,
and economists began to speak of “con- which has played an essential role in the
vergence,” when the impoverished “rest” spread of democracy and good governance.
would finally catch up to the West. Then And Robert Kaplan explores the desta-
came the fall. bilizing effects of slow growth on China
Today, with China slumping, energy and Russia, two great but struggling
prices collapsing, and nervous consumers powers that could soon become even
sitting on their hands, growth has ground more belligerent and unpredictable as
to a halt almost everywhere, and econo- their economies continue to sour.
mists, investors, and ordinary citizens are It’s not all bad news, however; Tyler
starting to confront a grim new reality: the Cowen, Zachary Karabell, and Ruth
world is stuck in the slow lane and nobody Porat all argue that it’s not yet time for
seems to know what to do about it. despair. Reviewing Robert Gordon’s
How did we get here? How can we The Rise and Fall of American Growth,
escape stagnation, and why aren’t the Cowen reminds us that predictions
old remedies working? And what are about growth are notoriously hard to
the geopolitical implications of this new get right and that breakthroughs, with
economic era? These are the questions all their attendant benefits, often arrive
this issue’s lead package tries to answer. when least expected. Karabell argues
Articles by Lawrence Summers and by that slow growth isn’t necessarily so
J. Tomilson Hill and Ian Morris kick hard to live with—at least not if costs
things off by explaining why, more than are also stagnating, which they are.
seven years after the Great Recession Porat, finally, brings us the view from
began, the recovery remains so weak. Google (now Alphabet): a markedly
Summers looks at the causes and conse- sunnier take that emphasizes the ability
quences of secular stagnation and finds a of technology and innovation to empower
remedy in expansionary fiscal policy. and energize people and make the world
Hill and Morris caution that the road a better place for everyone. Let’s hope
ahead looks even rougher, as central she’s right.
banks have already used every tool at —Jonathan Tepperman, Managing Editor
their disposal, leaving the global econ-
omy “without shock absorbers.”
Ruchir Sharma fleshes out the origin
story by highlighting a key problem that’s
often overlooked: radical declines in
The main constraint on the
industrial world’s economy
today is on the demand side
rather than the supply side.
—Lawrence Summers
A
s surprising as the recent 41 percent in 2008 to 74 percent today in
financial crisis and recession the United States, from 47 percent to
were, the behavior of the world’s 70 percent in Europe, and from 95 percent
industrialized economies and financial to 126 percent in Japan. Yet long-term
markets during the recovery has been interest rates are still remarkably low, with
even more so. ten-year government bond rates at around
Most observers expected the unusu- two percent in the United States, around
ally deep recession to be followed by an 0.5 percent in Germany, and around
unusually rapid recovery, with output and 0.2 percent in Japan as of the beginning
employment returning to trend levels of 2016. Such low long-term rates suggest
relatively quickly. Yet even with the U.S. that markets currently expect both low
Federal Reserve’s aggressive monetary inflation and low real interest rates to
policies, the recovery (both in the United continue for many years. With appropriate
States and around the globe) has fallen caveats about the complexities of drawing
significantly short of predictions and inferences from indexed bond markets,
has been far weaker than its predecessors. it is fair to say that inflation for the
Had the American economy performed entire industrial world is expected to be
as the Congressional Budget Office close to one percent for another decade
forecast in August 2009—after the and that real interest rates are expected
stimulus had been passed and the recov- to be around zero over that time frame.
ery had started—U.S. gdp today would In other words, nearly seven years into
be about $1.3 trillion higher than it is. the U.S. recovery, markets are not
Almost no one in 2009 imagined that expecting “normal” conditions to return
U.S. interest rates would stay near zero for anytime soon.
six years, that key interest rates in Europe The key to understanding this
would turn negative, and that central situation lies in the concept of secular
banks in the G-7 would collectively stagnation, first put forward by the
economist Alvin Hansen in the 1930s.
LAWRENCE H. SUMMERS is President The economies of the industrial world,
Emeritus and Charles W. Eliot University in this view, suffer from an imbalance
Professor of Economics at Harvard University. resulting from an increasing propensity
He served as U.S. Secretary of the Treasury
from 1999 to 2001 and Director of the National to save and a decreasing propensity to
Economic Council from 2009 to 2010. invest. The result is that excessive saving
2 f o r e i g n a f fa i r s
The Age of Secular Stagnation
March/April 2016 3
Lawrence H. Summers
goods, and tighter credit (with lending and subsequent deleveraging. But
more highly regulated than before). although these surely contributed to
Perhaps most important, the new the financial crisis, they seem insuffi-
economy tends to conserve capital. cient to account for the prolonged slow
Apple and Google, for example, are recovery. Moreover, the debt buildups
the two largest U.S. companies and are theory provides no natural explanation
eager to push the frontiers of technol- for the generation-long trend toward
ogy forward, yet both are awash in cash lower neutral real interest rates. It seems
and are under pressure to distribute more logical to see the debt buildups
more of it to their shareholders. Think decried by Rogoff as not simply exogenous
about Airbnb’s impact on hotel con- events but rather the consequence of a
struction, Uber’s impact on automobile growing excess of saving over investment
demand, Amazon’s impact on the con- and the easy monetary policies necessary
struction of malls, or the more general to maintain full employment.
impact of information technology on Gordon, meanwhile, has argued for
the demand for copiers, printers, and what might be called supply-side secular
office space. And in a period of rapid stagnation—a fundamental decline in
technological change, it can make sense the rate of productivity growth relative
to defer investment lest new technology to its golden age, from 1870 to 1970.
soon make the old obsolete. Gordon is likely right that over the next
Various studies have explored the several years, the growth in the potential
impact of these factors and attempted output of the American economy and
to estimate the extent to which they in the real wages of American workers
have reduced neutral real interest rates. will be quite slow. But if the primary
The most recent and thorough of these, culprit were declining supply (as op-
by Lukasz Rachel and Thomas Smith at posed to declining demand), one would
the Bank of England, concluded that for expect to see inflation accelerate rather
the industrial world, neutral real interest than decelerate.
rates have declined by about 4.5 per- For a decade, Bernanke has empha-
centage points over the last 30 years sized the idea of a savings glut emanat-
and are likely to stay low in the future. ing from cash thrown off by emerging
Together with the current price of markets. This was indeed an important
long-term bonds, this suggests that the factor in adding to excess saving in the
kind of Japan-style stagnation that has developed world a decade ago, and it
plagued the industrial world in recent may well be again if emerging markets
years may be with us for quite some time. continue to experience growing capital
flight. But both the timing and the scale
DIFFERENTIAL DIAGNOSIS of capital export from emerging markets
Not all economists are sold on the make it unlikely that it is the principal
secular stagnation hypothesis. Building reason for the major recent declines in
on the monumental history of financial neutral real interest rates.
crises he wrote with Carmen Reinhart, Krugman and some others have
for example, Rogoff ascribes current sought to explain recent events and make
difficulties to excessive debt buildups policy recommendations based on the
4 f o r e i g n a f fa i r s
The Age of Secular Stagnation
March/April 2016 5
Lawrence H. Summers
the idea that abnormally low unem- politicians eager to inflate away problems
ployment causes inflation to accelerate. but in bankers refusing to generate enough
According to this view, since policymak- demand to bring inflation up to target
ers would not accept permanently rising levels and permit reductions in real
rates of inflation, economies would tend interest rates. And fiscal policy, finally,
to fluctuate around a natural rate of takes on new significance as a tool in
unemployment, determined by factors economic stabilization.
such as labor flexibility, the availability As of yet, none of these principles
of benefits, and the effectiveness of has been fully accepted by policymakers
hiring and job searches. By skillfully in the advanced industrial world. It is
managing demand, policymakers could true that central banks have sought,
aspire to reduce the amplitude of the through quantitative easing, to loosen
fluctuations—and although they could monetary conditions even with short-
determine the average rate of inflation, term interest rates at rock bottom. But
they could not raise the average level they have treated these policies as a
of output. short-term expedient, not a longer-term
By the mid 1980s, once inflation had necessity. More important, these policies
been brought down from double-digit are running into diminishing returns
levels, a consensus on macroeconomic and giving rise to increasingly toxic side
policy emerged. The central objective effects. Sustained low rates tend to
of policy, most mainstream economists promote excess leverage, risk taking,
believed, should be to achieve a low and and asset bubbles.
relatively stable rate of inflation, since This does not mean that quantita-
there were no permanent gains to be tive easing was mistaken. Without such
had from higher inflation. This could policies, output would likely be even
best be accomplished, it was thought, lower, and the world economy might well
by firmly establishing the political have tipped into deflation. But monetary-
independence of central banks and by policy makers need to acknowledge
setting inflation targets in order to much more explicitly that neutral real
control expectations. Fiscal policy, rates have fallen substantially and that the
meanwhile, was not considered to have task now is to adjust policy accordingly.
a primary role in managing demand, This could include setting targets for
because it was slow acting and might nominal gdp growth rather than infla-
push interest rates up and because mon- tion, investing in a wider range of risk
etary policy could do what was needed. assets, making plans to allow base rates
Seen through the lens of the secular to turn negative, and underscoring the
stagnation hypothesis, however, all importance of avoiding a new recession.
these propositions are problematic. If When the primary policy challenge
it were possible to avoid secular stagna- for central banks was establishing cred-
tion, then it would indeed be possible to ibility that the printing press was under
increase average levels of output sub- control, it was appropriate for them to
stantially, raising the stakes for demand jealously guard their independence. When
management policy. The danger in the challenge is to accelerate, rather than
monetary policy, moreover, lies not in brake, economies, more cooperation with
6 f o r e i g n a f fa i r s
The Age of Secular Stagnation
domestic fiscal authorities and foreign more, not less, government debt. By
counterparts is necessary. stimulating growth and enabling an
The core problem of secular stagna- inflation increase that would permit a
tion is that the neutral real interest rate reduction in real capital costs, fiscal expan-
is too low. This rate, however, cannot be sion now would crowd investment in
increased through monetary policy. rather than out. Well-intentioned
Indeed, to the extent that easy money proposals to curtail prospective pension
works by accelerating investments and benefits, in contrast, might make matters
pulling forward demand, it will actually even worse by encouraging increased
reduce neutral real rates later on. That saving and reduced consumption, thus
is why primary responsibility for address- exacerbating secular stagnation.
ing secular stagnation should rest with The main constraint on the industrial
fiscal policy. An expansionary fiscal policy world’s economy today is on the demand,
can reduce national savings, raise neutral rather than the supply, side. This means
real interest rates, and stimulate growth. that measures that increase potential
Fiscal policy has other virtues as supply by promoting flexibility are
well, particularly when pursued through therefore less important than measures
public investment. A time of low real that offer the potential to increase demand,
interest rates, low materials prices, and such as regulatory reform and business
high construction unemployment is the tax reform. Other structural policies
ideal moment for a large public invest- that would promote demand include
ment program. It is tragic, therefore, steps to accelerate investments in renew-
that in the United States today, federal able technologies that could replace
infrastructure investment, net of depre- fossil fuels and measures to raise the
ciation, is running close to zero, and net share of total income going to those
government investment is lower than at with a high propensity to consume, such
any time in nearly six decades. as support for unions and increased
It is true that an expansionary fiscal minimum wages. Thus, John Maynard
policy would increase deficits, and many Keynes, writing in a similar situation
worry that running larger deficits would during the late 1930s, rightly emphasized
place larger burdens on later generations, the need for policy approaches that both
who will already face the challenges of promoted business confidence—the
an aging society. But those future genera- cheapest form of stimulus—and increased
tions will be better off owing lots of labor compensation.
money in long-term bonds at low rates
in a currency they can print than they TO HANGZHOU AND BEYOND
would be inheriting a vast deferred If each of the countries facing secular
maintenance liability. stagnation today were to confront it
Traditional concern with fiscal successfully on its own, the results
deficits has focused on their impact in would be very favorable for the global
pushing up interest rates and retarding economy. But international focus and
investment. Yet by setting yields so coordination have crucial additional
low and bond prices so high, markets roles to play.
are sending a clear signal that they want Secular stagnation, after all, increases
March/April 2016 7
Lawrence H. Summers
8 f o r e i g n a f fa i r s
The Age of Secular Stagnation
March/April 2016 9
Return to Table of Contents
I
n the years since the global financial then, the global economy is traveling
crisis of 2008 engulfed the world without shock absorbers. Another down-
and the United States fell into the turn—even a relatively ordinary one—
Great Recession, the panic has subsided would require central bankers to once
and Western economies have recovered again turn to experimental and seem-
to varying degrees. But the downturn’s ingly risky monetary policies, as they
effects have proved profound and lasting, did in response to the financial crisis.
and serious risks persist for the global Traditional tax cuts and spending pack-
economy. The recovery has been slow, ages would help but would likely prove
inflation levels remain below the targets insufficient: debt is already very high,
set by central banks, and total debt and intense political opposition to
levels are much higher than before the increasing it exists in many countries.
crisis began. Many investors, and even some
Worst of all, at least two dozen economists and analysts, have grown
countries—some with developed econo- complacent in recent years as the global
mies, others with emerging markets— economy has continued to recover. But
find themselves either at or very close to history suggests that no one should get
the so-called zero lower bound, meaning too comfortable. Since World War II, the
that their short-term nominal interest U.S. economy has fallen into a recession
rates hover around zero. At the zero every five years, on average. The longest
lower bound, central banks struggle to measured U.S. economic expansion
stimulate growth, since the simplest way lasted ten years, from 1991 until 2001.
for them to do so—dropping interest rates The current round of growth has already
even further—becomes nearly impossible lasted almost seven years—so even if it
when rates are already (almost) as low as matched the previous record-holder, it
they can go. The U.S. Federal Reserve would still end sometime in 2019.
has recently begun to raise interest rates Of course, records can be broken, and
U.S. economic history is not necessarily
J. TOMILSON HILL is President and CEO of
Blackstone Alternative Asset Management and
definitive; Australia, for example, has
Vice Chair of Blackstone. avoided a recession for nearly 25 years
IAN MORRIS is a Senior Managing Director at now, and the Netherlands racked up
Blackstone. almost 26 years of growth before 2008.
10 f o r e i g n a f fa i r s
Can Central Banks Goose Growth?
March/April 2016 11
J. Tomilson Hill and Ian Morris
into official unemployment statistics. eurozone also could not simply devalue
That change is not merely the result their currencies—a conventional way
of demographic shifts, such as baby of dealing with weak demand. So aside
boomers reaching retirement age; in from the quantitative easing that the
fact, the proportion of Americans of European Central Bank launched last
prime working age (25 to 54 years old) year—flooding the eurozone with money
who are currently working is significantly by buying government bonds—few
smaller than the proportion of Germans, good options seemed to exist for stimu-
Japanese, Swedish, and Swiss of that lating demand. Hence, some economists
age who are now employed. This sug- and analysts have championed reforms
gests that although unemployment may aimed at cutting inefficiencies on the
be low, the U.S. labor force is neverthe- supply side, arguing that such steps will
less underutilized. raise expectations for more growth and
employment in the long term. The theory,
SUPPLY OR DEMAND? in other words, is that supply reforms
To figure out how to boost stagnant can stimulate demand.
growth and employment rates, it’s crucial In practice, however, that has not
to determine whether the global economy panned out. Of course, eliminating red
suffers primarily from weak demand or tape is useful in good and bad times
from weak supply. The fact that inflation alike. And there’s no doubt that govern-
has remained below target rates strongly ments can boost demand by making it
suggests the problem is weak demand, easier and faster for businesses to obtain
since if supply were weak, the combina- licenses, project approvals, and utility
tion of that and easy money (owing to grid connections; by ensuring that govern-
low interest rates) would have produced ment agencies pay their bills promptly;
much more inflation than has actually and by nudging court systems to resolve
occurred. Many governments seem to commercial disputes more efficiently.
have overlooked this fact, however, and Simpler, smarter bank regulations can
have pursued remedies better suited to also encourage growth by making it
treating supply problems than demand easier for businesses to borrow, and tax
ones. These include labor reforms that reforms can encourage investment and
make it easier to hire and fire workers entrepreneurship.
and measures meant to introduce more But in the postcrisis period, pro-market
competition into traditionally sheltered reforms have not corresponded with
sectors of the economy. strong economic recovery. Consider
European governments, in particular, three useful measures of supply-side
have found such reform programs attrac- reform: the “product market regulation”
tive. In the wake of the crisis, states in scorecard published by the Organization
the eurozone found it difficult to stimu- for Economic Cooperation and Develop-
late growth by cutting government budget ment, which ranks countries based on
deficits; so-called austerity measures the extent to which their regulatory
did not produce the hoped-for boost in environments affect competition; the
private-sector confidence. And because oecd’s Employment Protection Legis-
they all use the euro, countries in the lation Index, which assesses the flexibil-
12 f o r e i g n a f fa i r s
Can Central Banks Goose Growth?
Bank on it: U.S. Federal Reserve Chair Janet Yellen in Washington, D.C., June 2014
ity of countries’ labor markets; and the Central banks have already established
World Bank’s Ease of Doing Business nominal interest rates at or close to
Index. If champions of supply-oriented zero, and further quantitative easing
reforms were right, then high marks on might prove ineffective owing to what
those three indexes should correlate with economists call “the liquidity trap.”
real growth and recovery. In fact, no such That condition, which is related to the
correlation exists. Ireland and Finland zero lower bound problem, occurs
had some of the best scores before the when an increase in the money supply
crisis, but Ireland went bust, and Finland (such as one produced by quantitative
has stagnated during the recovery. Mean- easing) fails to persuade people to
while, Greece and Portugal boast some spend more because they come to see
of the biggest postcrisis improvements cash and bonds as equivalent. Consider
in all three measures, yet they are suffering a scenario in which people were initially
some of the worst stagnation in Europe. inclined to hold government bonds at a
yield of just above zero but then find
IT’S A TRAP themselves holding more cash because
J O NAT HA N E R N ST / R E U T E R S
The trouble is that even if one accepts the central bank has purchased their
that demand-oriented problems require bonds to facilitate quantitative easing.
demand-oriented solutions, the zero In a liquidity trap, those people don’t
lower bound problem seems an insur- spend the cash—even though they can,
mountable obstacle. Should countries since it is liquid—because they view the
suffer another downturn, they would cash as being basically the same as the
have few ways to stimulate demand. bonds they had before.
March/April 2016 13
J. Tomilson Hill and Ian Morris
Should economies fall into that trap, undesirably high inflation from their
the only way to escape it (aside from a economies and they worry that setting
large and thus politically difficult fiscal higher inflation targets would amount
stimulus) would be to allow real interest to playing with fire. In reality, they are
rates to fall further, into negative terri- fighting yesterday’s war, but such firmly
tory, in order to discourage excessive entrenched views and preferences are
saving and boost investment. Under- difficult to overcome.
standably, investors and policymakers Other factors have also held down
dislike such conditions. Negative rates inflation. Recent economic growth in
feel strange and somehow wrong: Why developed economies has not benefited
would anyone invest in a bond that all groups equally, and growing income
not only doesn’t pay them returns but inequality has led many middle-class
actually loses them money? Yet the Americans and Europeans to feel and
so-called portfolio theory, developed behave as they would during a recession:
by the economist Harry Markowitz in saving more, spending less, and thus
the 1950s and later advanced by others, preventing inflation from rising. Slow-
shows that under certain circumstances, ing population growth in two major
investors should in fact seek assets with developed-world economic hubs, the
negative expected returns, as long as eurozone and Japan, has also reduced
doing so helps diversify their holdings. spending in those places. Meanwhile,
That is because at certain difficult times, in China and other countries with
such as a recession, when stock prices emerging economies, people continue to
dive, bonds with negative yields can save a high proportion of their incomes
represent a good investment, since the because they fear that government-
value of other assets might plummet funded social safety nets will prove
and interest rates might fall even further inadequate when they retire or should
into negative territory, which would they fall ill. Finally, since the financial
raise the prices of those bonds. crisis, all kinds of investors, including
But with nominal interest rates already large institutional players such as
at or near zero, how can central banks pension and insurance funds, have
engineer sufficiently negative real interest shown a preference for safe assets. That
rates? The only way to do so is to create has lowered overall demand for invest-
expectations that inflation will increase. ment and added to the downward
If the nominal interest rate is zero and pressure on inflation.
expected inflation is two percent, then At some point, as older people in
the real interest rate equals negative two developed economies begin to cash out
percent; likewise, at a nominal interest their investments in order to fund their
rate of zero, expected inflation of four retirement years, spending will increase,
percent results in a real interest rate of which should stimulate inflation. That
negative four percent. effect will be offset, however, because
But most central banks have proved by selling assets (houses, stocks, and so
unwilling to raise inflation targets, on) in order to pay their bills, retirees
because they have spent most of the will push down asset prices, which will
past three and a half decades wringing have a deflationary effect.
14 f o r e i g n a f fa i r s
AD_121004_Kent_Oxford_IR Mag_BSIS_Bulletin 19/01/2016
ACCENTUATE THE NEGATIVE
With traditional approaches exhausted
and so many factors contributing to
stagnation, officials need to be ready ADVANCED
to consider an array of more unconven-
tional options for protecting the global
INTERNATIONAL
economy when the next downturn STUDIES IN
inevitably arrives. THE CAPITAL
The first step would be relatively OF EUROPE
straightforward: governments should
cut taxes and engage in more stimulus Postgraduate education in
spending, including on critical infrastruc- international affairs taught
ture, which would help boost demand. in English by world-leading
But it’s doubtful that that kind of fiscal academics and experienced
policy would prove sufficient: it’s un- practitioners.
likely that governments would be able • Conflict and Security
to overcome political opposition to a • EU External Relations
stimulus that would add to already high • International and Human Rights Law
debt levels. So central banks will have • International Migration
• International Relations
to act boldly—for starters, by cutting • Political Economy
short-term rates into negative territory. • International Development
This has already happened in Denmark • Political Strategy and Communication
and Switzerland, where central banks have • Two Capitals Programme
set rates as low as negative 0.75 percent, Flexible study options – choose one
and the moves have not sparked panic: or two specialisations for full or
there have been no bank runs, and Danish part-time study.
and Swiss citizens have not started hoard-
Brussels based with internship
ing their cash under their mattresses. That and networking opportunities.
said, there is a limit to just how far below
zero short-term rates can go—perhaps T: +32 2 641 1721
negative three percent. Past that level, E: bsis@kent.ac.uk
bank runs might become a possibility. www.kent.ac.uk/brussels
Central banks should also take mea-
sures, such as more quantitative easing,
to reduce long-term rates. But at this
point, even another $1 trillion of quantita-
tive easing might not do much. So central
banks should also announce interest-
rate ceilings for long-term government
securities: perhaps a limit of 0.5 percent
for ten-year bonds. Setting a ceiling would
leave a greater supply of such bonds in
the market, because a credible plan for a
rate ceiling would itself drive down the
15
J. Tomilson Hill and Ian Morris
interest rate without the central bank the problem as well, since a widespread
having to actually buy many bonds. And belief that inflation will rise would itself
during an economic contraction, a greater be necessary to reduce real interest rates
supply of such bonds would be helpful and so cause a boom.
because uncertainty would likely pro- Another problem is that if the
duce a lot of demand for them. If rates inflation targets are not high enough,
were already very low on long-term then real interest rates cannot go low
securities, central banks could even enough to push inflation higher; as a
set negative rate ceilings on them. result, the economy would disappoint,
Another fairly radical step would be and inflation undershoot. Japan faces
to embrace “helicopter money drops,” the this risk now. It raised its inflation
term that the economist Milton Friedman target to two percent in 2013, but to
coined to describe direct transfers of judge from actual inflation, which has
cash from central banks to consumers. been persistently much lower than
Such transfers would likely be more two percent over the past few years, it
effective than quantitative easing at seems possible that Japan did not set
boosting demand because they would the target high enough.
cut out the middlemen—banks—and Once a central bank picks an infla-
the need to wait for them to turn bank tion target, however, there are things
reserves into loans, which might not the bank can do to help the economy
even materialize in the face of weak reach it. Among them is a quantitative-
demand for loans. Some would object easing debt-buyback program to reduce
that such “money printing” would be the government’s debt-to-gdp ratio.
inflationary. But if deflation were the In the event of a deflationary recession,
problem, that effect would be a benefit, government debt might rise high enough
not a cost. And should inflation threaten to create uncertainty, depress confidence,
to rise beyond a desirable level, central and significantly weaken economic
banks could easily raise interest rates. conditions. In the United States, for
Central banks should also get over example, a severe recession could raise
their reluctance to establish higher government debt to 150 percent of gdp.
inflation targets, because doing so is the Japan’s government debt has already
most logical way to reduce real interest risen to almost 250 percent of gdp. If
rates. A growing chorus of economists central bankers believed that debt reduc-
now recommend that some central banks tion would aid economic recovery by
take this step, arguing for a target of boosting confidence, they could announce
around four percent. But that’s easier a plan to explicitly reduce outstanding
said than done. The economist Willem debt on a permanent basis by purchasing
Buiter rightly worries about central debt equal to, say, 50 percent of gdp
banks “spitting in the wind”: setting over five years, spread equally among
inflation targets that would amount to securities that matured after six to ten
little more than empty promises, not years. As the bonds matured, the central
backed up by any evidence that demand bank would give the proceeds back to the
will actually boom and cause inflation treasury. This would be the equivalent
to rise. There is a Catch-22 quality to of the treasury not paying back its debt.
16 f o r e i g n a f fa i r s
Can Central Banks Goose Growth?
It would represent a form of monetary country made the switch, the faster
financing, which could push inflation its economy recovered.
expectations up, therefore reducing real A similar dynamic might emerge in
interest rates, raising inflation expecta- the years ahead. Developed economies
tions further, and encouraging growth. are recovering from the financial crisis
The perceived downside to this strategy and the Great Recession, but at least two
is that the central bank’s assets would dozen countries face the zero lower bound
decline as the bonds matured. Financial problem or might soon, and the global
markets wouldn’t be thrilled, but the economy remains dangerously vulnerable
benefits of a debt buyback would likely to negative shocks. Eventually—probably
outweigh that cost. during the next downturn—stagnation
A final idea that governments should will force one or a few countries to dig
consider is a “deflation insurance” plan even deeper into the unconventional
to protect consumers and companies toolbox. There will be no easy fixes. But
from the increase in their real debts that armed with new ways to speed growth
deflation would cause, even if their and a willingness to experiment, some
nominal, actual money debts did not countries will get it right, and then others
change. In the event of a severe defla- will follow as success breeds success.
tion, consumers and companies would Policymakers all over the world should
include claims for deflation insurance do everything they can to prepare now
payments with their tax filings. The so they can be early adopters and avoid
government could insist that the pay- getting left behind.∂
ments be used only for debt reduction.
Some might object that the companies
and consumers with the most debt
would receive the most compensation;
to address such concerns, policymakers
could place limits on how much any one
firm or household could claim.
Such a plan would cost the govern-
ment nothing during normal times,
because there would be no deflation.
And the mere existence of such a scheme
would likely lower the risk of deflation,
because people would know the insurance
exists and so would be less likely to pull
back from investing and taking on debt.
March/April 2016 17
Return to Table of Contents
I
n every single region of the world, percent per year, but since 2005, the rate
economic growth has failed to return has downshifted to just 1.1 percent, and
to the rate it averaged before the it will likely slip further in the coming
Great Recession. Economists have come decades as fertility rates continue to
up with a variety of theories for why decline in most parts of the world. The
this recovery has been the weakest in labor force is still growing rapidly in
postwar history, including high indebt- Nigeria, the Philippines, and a few other
edness, growing income inequality, and countries. But it is growing very slowly
excess caution induced by the original in the United States—at 0.5 percent per
debt crisis. Although each explanation year over the past decade, compared
has some merit, experts have largely with 1.7 percent from 1960 to 2005—and
overlooked what may be the most impor- is already shrinking in some countries,
tant factor: the global slowdown in the such as China and Germany.
growth of the labor force. The implications for the world
One way to calculate the world’s economy are clear: a one-percentage-
potential growth rate is to add the rate point decline in the population growth
at which the labor force is expanding to rate will eventually reduce the economic
the rate at which productivity is rising. growth rate by roughly a percentage
Since 1960, gains in both factors have point. A collapse in the growth rate
contributed equally to potential economic of the working-age population was
growth. And in the last decade, the gains already under way before the financial
in both appear to have leveled off. The crisis, and the trend explains a good
difference between these two drivers, chunk of the persistently disappoint-
however, is that there is a debate about ing recovery since. Governments can
whether the decline in productivity offer incentives to boost fertility rates
growth is real. Productivity measure- and lure more adults into the work
ments have arguably failed to capture force—and many already are—but
these half measures can only partially
RUCHIR SHARMA is Head of Emerging offset the larger forces at work. Ulti-
Markets and Global Macro at Morgan Stanley mately, then, the world should brace
Investment Management and the author of the
forthcoming book The Rise and Fall of Nations: itself for slower growth and fewer
Forces of Change in the Post-Crisis World. economic standouts.
18 f o r e i g n a f fa i r s
The Demographics of Stagnation
March/April 2016 19
Ruchir Sharma
20 f o r e i g n a f fa i r s
The Demographics of Stagnation
growth and gdp growth are available. countries, the working-age populations
In 38 of these cases, the working-age are still expanding at a rate near or
population shrank. The average gdp above two percent a year. This group
growth rate in these countries was a includes Bangladesh, Kenya, Nigeria,
measly 1.5 percent. Only three of them and the Philippines. Demographers
managed to sustain gdp growth rates expect these populations to keep grow-
of six percent or higher, and all three ing rapidly for the next decade. But
were small countries bouncing back even these countries have their work
from political turmoil: Portugal in the cut out for them. They must avoid
March/April 2016 21
Ruchir Sharma
falling for the fallacy of the demographic entering the work force. For 30 years,
dividend: the idea that population the working-age population in the
growth automatically translates into an United States has grown much faster
economic boom. than those of its major industrial rivals:
The truth is that most of the time, it twice as fast as those populations in
doesn’t. More than 60 percent of those France and the United Kingdom, five
698 cases I looked at had working-age times as fast as that in Germany, and ten
population growth rates above two times as fast as that in Japan. No wonder
percent, but only a quarter of those the U.S. economy has also grown faster.
population booms led to average growth As in much of the developing world,
rates of six percent or higher in the population forecasts for the developed
same decade. Today, then, even Nigeria world are discouraging. Looking at the
can’t assume that its booming working- leading developed economies over the
age population—projected to grow at next five years, the number of working-
three percent a year between 2015 and age people is expected to remain static
2020—will automatically translate into in France, shrink a little in Spain, and
a booming economy. Leaders still need contract at the rapid pace of 0.4 percent
to create the conditions necessary to a year or more in Germany, Italy, and
attract investment and generate jobs. Japan. The forecast for the United States
To see what happens when leaders looks less bleak, with a positive working-
fail to capitalize on a potential demo- age population growth rate of 0.2 per-
graphic dividend, consider the Arab cent, about the same as in Canada and
world. Its working-age population grew the United Kingdom. The best news for
by an average annual rate of more than advanced economies is confined to the
three percent between 1985 and 2005— smaller ones: in Australia and Singapore,
nearly twice as fast as the rate in the the working-age populations are still
rest of the world. But the region never growing at a reasonably fast clip of close
experienced an economic boom. At the to one percent. But these countries are
beginning of this decade, many Arab too small to compensate for weaker
countries suffered from cripplingly high growth in other rich nations.
youth unemployment rates: around 30
percent in Egypt, Iraq, Saudi Arabia, ACCEPTING THE INEVITABLE
and Tunisia, the last being where the Governments have already started trying
chaos of the Arab Spring began. to fight the population slowdown, begin-
It’s not just in the developing world ning with strategies to attack falling
where economic growth depends on a fertility rates. According to the un,
rising number of workers. In recent the share of developing countries with
decades, the United States has earned active population-control policies, after
a reputation as the most dynamic of rising sharply in the 1970s and 1980s,
the advanced economies, far more has leveled off at about 60 percent since
innovative than Europe, far less hide- the mid-1990s. Lately, some of the biggest
bound than Japan. But much of its recent developing countries have reversed
success can be traced to something more course—most notably, China, which
mundane: the increase in young people ended its one-child policy last year.
22 f o r e i g n a f fa i r s
At the same time, the share of devel-
oped countries that have implemented
so-called baby bonuses and other policies
to boost fertility rates has risen, from THE
HUNTINGTON
about 30 percent in 1996 to 70 percent
today. In places where the fertility rate
PRIZE
is falling below the replacement level of
2.1, a growing number of governments
are subsidizing motherhood in an effort
to encourage women to have more than
two children. In some countries, such
as Chile and France, the subsidies grow CALL FOR BOOKS
even more generous with the third,
Students and friends of Samuel
fourth, and fifth child. But several of the
countries that pioneered these programs, P. Huntington (1927–2008) have
including Canada in 1988 and Australia established a prize in the amount of
in the last decade, found that they had a $10,000 for the best book published
limited impact and later pared them back. each year in the field of national
The second set of strategies is aimed security. The book can be a work
at bringing more adults into the labor
force, including the elderly, foreigners, of history or political science, or a
and women. In 2007, Germany increased work by a practitioner of statecraft.
the retirement age from 65 to 67. Most The prize will not be awarded if the
other European countries have since Huntington Prize Committee judges
followed suit, and some have started that the submissions in a given year
indexing their retirement ages to rising
do not meet the high standards set
life expectancy. In the same vein, before
anti-immigrant movements started taking by Samuel P. Huntington.
off in Europe and the United States in The Huntington Prize Committee is
2015, the competition to attract foreign pleased to solicit nominations for
workers had been heating up. According
books published in 2015.
to the un, in 2010, just ten countries
had announced plans to increase the size Nominations will be accepted until
of their populations through immigra- 31 May 2016
tion; by 2013, 22 had. A letter of nomination and two copies of the book
Then there are the ongoing efforts to should be sent to:
lift the female labor-force participation Ann Townes
rate, which flatlined at around 57 percent Weatherhead Center for International Affairs
worldwide after 1990, before slipping to Knafel Building
55 percent this decade. According to the 1737 Cambridge Street
Cambridge, MA 02138
Organization for Economic Cooperation
and Development, if its member states
eliminated the gender gap in labor-force
participation, they would see their gdps
23
Ruchir Sharma
24 f o r e i g n a f fa i r s
RIGOROUS RESEARCH
Ideas with impact—outside the Beltway
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T
he two economic developments poorer people in the developing world
that have garnered the most who are the chief victims of weak or
attention in recent years are the abusive governments. The rich world
concentration of massive wealth in could lose out, too, since improvements
the richest one percent of the world’s in governance allow poor countries to
population and the tremendous, growth- collaborate with the international com-
driven decline in extreme poverty in munity in managing the risks posed by
the developing world, especially in pandemics, terrorist groups, climate
China. But just as important has been change, waves of political refugees, and
the emergence of large middle classes other regional and global problems.
in developing countries around the Governments in the developing world
planet. This phenomenon—the result and in rich countries alike would do well
of more than two decades of nearly to nurture and protect the legitimate
continuous fast-paced global economic interests of the new middle classes.
growth—has been good not only for
economies but also for governance. WHO IS MIDDLE CLASS?
After all, history suggests that a large In today’s high-income countries, “mid-
and secure middle class is a solid foun- dle class” is a relative measure: most
dation on which to build and sustain households earn enough money to place
an effective, democratic state. Middle them more or less in the middle of the
classes not only have the wherewithal to national income distribution. But “mid-
finance vital services such as roads and dle class” has always been an absolute
public education through taxes; they concept as well: to be middle class means
also demand regulations, the fair enjoying sufficient material security to
enforcement of contracts, and the rule be able to credibly plan for the future.
of law more generally—public goods That definition is particularly important
that create a level social and economic in the developing world, where economists
playing field on which all can prosper. increasingly identify a middle-class
household as one with enough income
NANCY BIRDSALL is Founding President of to survive such shocks as a spell of unem-
the Center for Global Development and former
Executive Vice President of the Inter-American ployment, a health emergency, or even
Development Bank. the bankruptcy of a small business
March/April 2016 25
Nancy Birdsall
26 f o r e i g n a f fa i r s
Middle-Class Heroes
middle class had shrunk to 40 percent growth for more than two decades under
of the population. In the past ten years, President Paul Kagame.)
it has almost surely shrunk even further. In The point is that when it comes to
2012, more than 50 percent of Thailand’s the middle class, size matters, but it is
population belonged to the $10-per-day not everything. For example, if a middle
middle class. But the following year, the class grows large but then feels threatened
March/April 2016 27
Nancy Birdsall
during a major economic downturn, its world still lived in places where the
members may succumb to demagogic distribution of income could be charac-
and populist appeals—from the right terized (with only slight exaggeration)
or the left. In Argentina, a decade of as bimodal: a small elite lived in com-
inflation and a debt crisis in 2001–2 paved fort, while the vast majority of people
the way for the revival of Peronist were poor. There were exceptions,
populism, which shaped the policies of including Singapore, South Korea, and
Néstor Kirchner, who served as presi- a number of Latin American countries
dent from 2003 to 2007, and of his wife, in which industrialization had begun
Cristina, who succeeded her husband before World War II. By 1990, South
and served until last year, when she was Korea had experienced 30 years of extraor-
defeated in a bid for a third term. This dinary growth. As a result, more than
dynamic is hardly exclusive to the devel- 60 percent of its population earned an
oping world: a 2015 Pew Research Center annual household income of $10,000 or
study concluded that the size of the U.S. more in today’s U.S. dollars. South Korea
middle class and its share of the coun- had, in effect, already become a middle-
try’s income and wealth are shrinking, class society; at the same moment, it was
which might partly explain the appeal also completing a transition to democracy
of “outsider,” nonestablishment candi- after decades of military rule.
dates in this year’s presidential race. But across most of the developing
And in Europe, the fear of slow growth world, the $10-per-day middle class
and worries about a “new machine age,” was still tiny. In China, India, and sub-
in which automation and robots will Saharan Africa, it represented less
eliminate jobs now held by well-educated than two percent of the population—
members of the middle class, help account and in Africa, that number was probably
for the growing influence of anti- made up mostly of civil servants and
immigrant right-wing political parties. the employees of international organi-
Put simply, to constitute a politically zations and Western aid groups. Most
positive force, a middle class must be people in Asia and Africa were still
not only large relative to a country’s either terribly poor or just getting by.
other classes but also prospering and Then, in the early 1990s, growth
feeling confident. That is not surprising: took off across the developing world
behavioral studies show that for most and accelerated further during the first
people, losing ground is more troubling decade of this century, as low interest
than never gaining it, a tendency known rates and a commodities boom benefited
as “loss aversion.” Widespread fears of many low- and middle-income countries.
looming losses undermine the sense of Between 1990 and 2015, around one
security and the expectations of a better billion people escaped poverty, includ-
future that characterize the middle class. ing about 650 million in China and
India. During the same period, some
A MIDDLE-CLASS WORLD 900 million people entered the $10-per-
Twenty-five years ago, hardly any day middle class.
developing countries had large, grow- The most extraordinary middle-
ing middle classes. Most people in the class growth has come in urban areas
28 f o r e i g n a f fa i r s
Middle-Class Heroes
March/April 2016 29
Nancy Birdsall
West that began with British industrial- a large and relatively resilient middle
ization in the nineteenth century and class contributed to the recent defeat
eventually allowed liberal democracy to of former President Cristina Fernández
spread throughout Europe and North de Kirchner’s handpicked successor,
America. During the twentieth century, rejecting the costs of continued economic
the West left the rest of the world populism. And perhaps it’s no accident
behind. The ratio of the median house- that Tunisia—where about 30 percent
hold income in the rich countries of the of the population belongs to the middle
West to that in the rest of the world grew class (a very large proportion compared
from about five to one in 1900 to around with most of the Arab world)—is the
20 to 1 in 2000. The West experienced only country to have emerged from the
the twentieth century as one long virtuous Arab revolts of 2010–11 with something
cycle—interrupted by war and depres- resembling democratic rule.
sion, of course—in which economic
growth nurtured middle classes that in SOFT IN THE MIDDLE
turn fought and paid for the state-led The trouble is that the ongoing conver-
foundations of continuing growth: the sion of economic gains into political
rule of law, institutions that created the progress requires continued growth,
environment for entrepreneurship and and the global slowdown now threatens
innovation, and well-regulated markets. that process. Middle classes in Brazil,
The past few decades might prove to urban China, and Turkey are big but
be an early chapter in a similar story still new; the endurance of the political
for the developing world. For one thing, and social benefits they have provided
the globalization of markets may be depends on their institutionalization
speeding up the process. Globalization over the long term and the adoption
has favored the middle class by creating of customs and rules that take a long
economies that richly reward educated time to harden into habits. A prolonged
workers, making it easier to obtain downturn in growth will complicate
mortgage loans and other forms of things in those countries—far more so
credit, and generating manufacturing than in the United States and western
and retail supply chains that offer Europe, where middle classes are suffer-
plenty of good jobs for skilled people. ing but the institutions built around them
Meanwhile, advances in communica- are well established and relatively strong.
tions technology—the Internet, mobile In most emerging markets, high
devices, and social media—have empow- growth during the last decade depended
ered middle classes around the world on commodity exports and low interest
to organize and advocate corporate and rates. High profits and easy credit created
government accountability. retail and public-service jobs for gradu-
Optimists see those changes as major ates of secondary schools but did not
factors driving current political trends necessarily raise productivity in manu-
in some countries. In Turkey, factions facturing and large-scale agriculture.
within the urban middle class have resisted The economist Dani Rodrik worries
the creeping authoritarianism of President about what he calls “premature de
Recep Tayyip Erdogan. In Argentina, industrialization” in the developing world,
30 f o r e i g n a f fa i r s
Middle-Class Heroes
March/April 2016 31
Nancy Birdsall
32 f o r e i g n a f fa i r s
“ With GMAP, you do not just learn
diplomacy – you live it. Every single day.
The program has changed my outlook
on everything I do, personally
and professionally.”
– Siobhan MacDermott, GMAP 13
Principal, Cybersecurity, Ernst & Young
A
s China asserts itself in its Already, these leaders no doubt suffer
nearby seas and Russia wages from a profound sense of insecurity, as
war in Syria and Ukraine, it their homelands have long been virtually
is easy to assume that Eurasia’s two surrounded by enemies, with flatlands
great land powers are showing signs of open to invaders. And already, they are
newfound strength. But the opposite finding it harder to exert control over
is true: increasingly, China and Russia their countries’ immense territories,
flex their muscles not because they are with potential rebellions brewing in
powerful but because they are weak. their far-flung regions.
Unlike Nazi Germany, whose power at The world has seen the kind of anarchy
home in the 1930s fueled its military that ethnic, political, and sectarian conflict
aggression abroad, today’s revisionist can cause in small and medium-size
powers are experiencing the reverse states. But the prospect of quasi anarchy
phenomenon. In China and Russia, it in two economically struggling giants is
is domestic insecurity that is breeding far more worrisome. As conditions worsen
belligerence. This marks a historical at home, China and Russia are likely to
turning point: for the first time since increasingly export their troubles in the
the Berlin Wall fell, the United States hope that nationalism will distract their
finds itself in a competition among disgruntled citizens and mobilize their
great powers. populations. This type of belligerence
Economic conditions in both China presents an especially difficult problem
and Russia are steadily worsening. Ever for Western countries. Whereas aggres-
since energy prices collapsed in 2014, sion driven by domestic strength often
Russia has been caught in a serious follows a methodical, well-developed
recession. China, meanwhile, has entered strategy—one that can be interpreted by
the early stages of what promises to be other states, which can then react appro-
a tumultuous transition away from double- priately—that fueled by domestic crisis
digit annual gdp growth; the stock market can result in daring, reactive, and impul-
sive behavior, which is much harder to
ROBERT D. KAPLAN is a Senior Fellow at the forecast and counter.
Center for a New American Security and the
author of In Europe’s Shadow: Two Cold Wars and a As U.S. policymakers contemplate
Thirty-Year Journey Through Romania and Beyond. their response to the growing hostility
March/April 2016 33
Robert D. Kaplan
of Beijing and Moscow, their first task also, more broadly, to restore Moscow’s
should be to avoid needlessly provoking position in the Levant—and to buy
these extremely sensitive and domesti- leverage with the eu by influencing the
cally declining powers. That said, they flow of refugees to Europe.
cannot afford to stand idly by as China Not coincidentally, these military
and Russia redraw international borders adventures have accompanied the sharp
and maritime boundaries. The answer? reversal of Russian economic power.
Washington needs to set clear redlines, In 2014, the price of oil collapsed, the
quietly communicated—and be ready countries of central and eastern Europe
to back them up with military power continued to wean themselves off Russian
if necessary. gas, slow global growth further reduced
the appetite for Russian hydrocarbons
DANGER IN MOSCOW and other natural resources, and the
Partly because Russia’s economic problems West levied damaging sanctions on
are far more severe than China’s, Moscow’s Moscow. The result has been a full-
aggression has been more naked. After blown economic crisis, with the ruble
President Boris Yeltsin’s chaotic rule came losing roughly half of its value against
to an end in 1999, Putin consolidated the U.S. dollar since 2014. That year,
central authority. As energy prices soared, Russian gdp growth fell to nearly zero,
he harnessed Russia’s hydrocarbon-rich and by the third quarter of 2015, the
economy to create a sphere of influence in economy was shrinking by more than
the countries of the former Soviet Union four percent. In the first eight months
and the Warsaw Pact. His goal was clear: of 2015, capital investment declined by
to restore the old empire. six percent and the volume of construc-
But since direct rule through commu- tion fell by eight percent.
nist parties had proved too costly, Putin Russia’s economic problems run deep,
preferred an oblique form of imperialism. leaving its leaders with few easy options
In lieu of sending troops into the old for fixing them. For decades, Russia has
domains, he built a Pharaonic network relied on natural resource production
of energy pipelines, helped politicians and a manufacturing sector that makes
in neighboring countries in various consumer goods for the domestic market
ways, ran intelligence operations, and (since few foreigners want to buy Russia’s
used third parties to buy control of local nonmilitary products). Despite some
media. Only recently has Putin acted pockets of ostentatious wealth, the service
more overtly on a number of fronts, sector has remained underdeveloped.
encouraged no doubt by the lack of a Because Putin and his camarilla never
Western response to his 2008 military built civil institutions or a truly free
campaign in Georgia. In early 2014, market, the corrupt, gangster-led economy
Russian forces seized Crimea and Russian of Russia today exhibits eerie similarities
proxy militias initiated a war in eastern to the old Soviet one.
Ukraine. And in late 2015, Putin inserted Back in the 1980s, when that economy
the Russian military into the Syrian was hit by a crisis, Mikhail Gorbachev
civil war, specifically to save the regime responded by opening up the political
of Syrian President Bashar al-Assad but system—only to be rewarded with
34 f o r e i g n a f fa i r s
Eurasia’s Coming Anarchy
Show of weakness: police officers in China’s Xinjiang Uygur Autonomous Region, May 2014
anarchy and the collapse of Russia’s preferable, but they fear the risks of
empire. Putin learned this lesson well such a transition.
and is determined to do the opposite: Try as he might, however, Putin will
keep the political system closed while not be able to shelter his regime from
distracting the masses with displays the fallout of economic collapse. Des-
of Russian power in the near abroad. peration will spawn infighting among a
Putin is a former intelligence agent, not ruling elite that has grown used to sharing
a former apparatchik. Thus, although generous spoils. Given the absence of
he nurses historical grudges concerning strong institutions, as well as the brittle
Russia’s place in the world, he is not and highly centralized nature of the
deceiving himself about Russia’s inter- regime, a coup like the one that toppled
nal problems. As the Russian economy Nikita Khrushchev in 1964 cannot be
decays further, Putin surely knows that ruled out; Russia remains Soviet in its
for the sake of domestic approval, his style of governance. The country has
foreign policy must become more cre- experienced the crumbling of autocracy
ative and calculating, even deceptively followed by chaos before (as during and
conciliatory at moments. Over time, after the 1917 revolutions), and it’s possible
expect him to find new ways to under- that enough turmoil could cause Russia
P E TAR K U J U N D Z I C / R E U T E R S
mine nato and the eu, even as he claims to fragment yet again. The heavily Mus-
to be helping the West fight the Islamic lim North Caucasus, along with areas
State, or isis. For the more chaos he of Russia’s Siberian and Far Eastern
can generate abroad, the more valuable districts, distant from the center and
the autocratic stability he provides at burdened by bloody politics, may begin
home will appear. Russians may know loosening their ties to Moscow in the
in the abstract that a freer society is event of instability inside the Kremlin
March/April 2016 35
Robert D. Kaplan
itself. The result could be Yugoslavia resolidifying their borders, the migrant
lite: violence and separatism that begin and terrorism crises will also exacerbate
in one place and spread elsewhere. As the eu’s divisions—and, inevitably,
Moscow loses control, the global jihadist nato’s as well.
movement could take advantage of the Such disunity will make Europe’s
vacuum and come to Russia’s outlying attempts to confront Russia even more
regions and to Central Asia. hesitant and disorganized than they
Bad as this sounds, things could are today. As nato weakens, the former
still get worse. Back in 1991, the Polish Warsaw Pact states will increasingly
intellectual Adam Michnik predicted look to the United States for their
that future leaders in Russia and eastern security. They will also divide into
Europe would fill the gap left by the subgroups: already, Poland, the Baltic
collapse of communism with “a coarse countries, and Scandinavia are forming
and primitive nationalism.” Putin has an alliance of sorts to withstand Russian
adopted just such a nationalism in recent aggression, and the Visegrad Group—
years. He has slyly backed separatist which includes the Czech Republic,
movements in Abkhazia, the Donbas, Hungary, Poland, and Slovakia—is
Nagorno-Karabakh, South Ossetia, and becoming more concrete in terms of
Transnistria, creating deniable conflicts its political and military consultation.
that result in warlord-run statelets. In Further sowing division is Nord Stream
the years ahead, he may well choose to 2, a proposed second pipeline through
provoke more of these so-called frozen the Baltic Sea that would allow Russia
conflicts, but this time in nato’s Baltic to bypass central and eastern Europe
member states (which have sizable when sending gas to western Europe.
Russian populations and which Moscow In all these countries, slow economic
still considers lost provinces). Mean- growth will intensify right-wing and
while, Putin will try to play on Europe’s left-wing nationalist movements, which
need for Russian support in Syria to prey on unmet economic expectations.
force Europe to acknowledge his annexa-
tion of Crimea and his de facto rule over BEIJING ON THE BRINK
eastern Ukraine. Slow growth is also leading China to
But just when a firm response is externalize its internal weaknesses.
most needed, Europe is looking less Since the mid-1990s, Beijing has been
and less likely to be able to provide one. building a high-tech military, featuring
In some ways, Russia’s current crisis advanced submarines, fighter jets, ballis-
parallels that of Europe, which is also tic missiles, and cyberwarfare units. Just
dividing into core and peripheral areas. as the United States worked to exclude
Despite adjustments by the European European powers from the Caribbean
Central Bank and other measures, a Sea beginning in the nineteenth century,
time of slow global growth, coupled China is now seeking to exclude the U.S.
with Europe’s inability to make funda- Navy from the East China and South
mental reforms, means that the Euro- China Seas. Its neighbors have grown
pean political and economic crisis worried: Japan, which views Chinese
will persist. By frightening states into naval expansion as an existential threat,
36 f o r e i g n a f fa i r s
is shedding its pacifism and upgrading
its forces, and Malaysia, the Philippines,
Singapore, and Vietnam have modern-
ized their militaries, too. What were
once relatively placid, U.S.-dominated
waters throughout the Cold War have
become rougher. A stable, unipolar Journal of
naval environment has given way to a
more unstable, multipolar one.
Cold War Studies
But as with Russia, China’s aggres-
sion increasingly reflects its cresting
power, as its economy slows after decades
of acceleration. Annual gdp growth
has dropped from the double-digit rates
that prevailed for most of the first decade
of this century to an official 6.9 percent
in the third quarter of 2015, with the true
figure no doubt lower. Bubbles in the
housing and stock markets have burst, and
other imbalances in China’s overlever-
aged economy, especially in its shadow
banking sector, are legion.
Then there are the growing ethnic
tensions in this vast country. To some The Journal of Cold War Studies
degree, the Han-dominated state of
features peer-reviewed articles
China is a prison of various nations,
based on archival research in the
including the Mongols, the Tibetans,
and the Uighurs, all of whom have in former Communist world and in
varying degrees resisted central con- Western countries. Articles in the
trol. Today, Uighur militants represent journal use declassified materials
the most immediate separatist threat. and new memoirs to illuminate
Some have received training in Iraq and raise questions about
and Syria, and as they link up with the numerous theoretical concerns.
global jihadist movement, the danger
Published quarterly by the MIT Press for
will grow. In recent years, there has the Harvard Project on Cold War Studies.
been a dramatic upsurge of bombings
linked to Uighur separatism in the region e
of Guangxi, a transit point on the smug- ri b e fo r co m p lete access to th
Subsc issue.
gling route Uighurs take to Vietnam— n lin e ar ch iv e, back to the first
o
proof that terrorism will not be con-
fined to minority areas in China’s west.
Beijing has tried to pacify these move- mitpressjournals.org/jcws
ments with economic development—
for example, proposing the Silk Road
Economic Belt in Central Asia in order And since these acts of brinkmanship
to undermine Uighur nationalism have taken place at sea, they have
there. But if such immense projects caused no hardship for civilians and
falter because of China’s own slowing practically no military casualties.
economy, separatism could explode Other Chinese moves are less subtle.
into greater violence. Besides expanding its maritime claims,
Even more so than Putin, Xi, with China is building roads, railways, and
years of experience serving the Com- pipelines deep into Central Asia and is
munist Party in interior China, must promising to invest tens of billions of
harbor few illusions about the depth of dollars in a transportation corridor that
China’s economic problems. But that will stretch from western China across
does not mean he knows how to fix them. Pakistan to the Indian Ocean, where
Xi has responded to China’s economic China has been involved in port proj-
disarray by embarking on an anticorrup- ects from Tanzania to Myanmar (also
tion drive, yet this campaign has primarily called Burma). As China’s economic
functioned as a great political purge, troubles worsen, the elegance of its
enabling him to consolidate China’s aggression may wear off and be replaced
national security state around his own by cruder, more impulsive actions. Xi
person. Since decisions are no longer will find it harder to resist the urge to
made as collectively as before, Xi now use Asian maritime disputes to stoke
has greater autonomy to channel domes- nationalism, a force that brings a mea-
tic anxiety into foreign aggression. In sure of cohesion to societies threatening
the last three decades, China’s leadership to fragment.
was relatively predictable, risk averse, Potentially adding to the danger
and collegial. But China’s internal politi- are looming crises in the countries of
cal situation has become far less benign. Central Asia: Kazakhstan, Kyrgyzstan,
China’s ambitions reach further than Tajikistan, Turkmenistan, and Uzbeki-
Russia’s, but they have generated less stan. The continued stability of these
concern in the West because they have authoritarian countries has made it easier
been more elegantly applied. Whereas for China to control its own Central
Putin has sent thugs with ski masks and Asian minorities, but time may be run-
assault rifles into eastern Ukraine, Xi’s ning out. Some of these regimes are still
aggression has involved much smaller, led by the same Brezhnev-era Central
incremental steps, making it madden- Committee types who have ruled since
ingly difficulty for the United States to the end of the Cold War. These leaders
respond without appearing to overreact. are now aging, their regimes enjoy
He has sent his coast guard and merchant questionable legitimacy, their economies
ships (rather than exclusively his navy) remain tied to China’s and Russia’s own
to harass Philippine warships, dispatched slowing engines, and their populations
an oil rig into waters claimed by both are growing more Islamic. Central Asia,
China and Vietnam (but for only a few in other words, may be ripe for an Arab
weeks), and engaged in land-reclamation Spring–like eruption.
projects on contested islands and reefs Facing parallel economic slowdowns
(but ones that are devoid of people). and geopolitical threats, China and
38 f o r e i g n a f fa i r s
Eurasia’s Coming Anarchy
Russia may forge a tactical alliance the United States stand up for human
based on their compatible authoritarian rights inside China while standing by
systems and aimed at managing their as the regime puts down an internal
frontier areas and standing up to the rebellion?
West. To this end, the two of them Planning for such contingencies does
finally resolved a long-running border not mean planning a war of liberation,
dispute last November, with Russia à la Iraq. (If China and Russia are ever
giving up a small tract of land in its to develop more liberal governments,
Far East claimed by China. But the their people will have to bring about
handover caused popular protests in change themselves.) But it does mean
both countries: ordinary Russians minimizing the possibility of disorder.
opposed the Kremlin’s acquiescence, To avoid the nightmarish security crises
and many Chinese complained that that could result, Washington will
they got too little. Here again, public need to issue clear redlines. Whenever
opinion can constrain dictatorships, possible, however, it should communi-
in this case inhibiting their ability to cate these redlines privately, without
forge useful alliances. grandstanding. Although congressional
firebrands seem not to realize it, the
THE COMING CHAOS United States gains nothing from baiting
Central control—who has it, who nervous regimes worried about losing
doesn’t—is the geopolitical issue of face at home.
our time. Centralized authoritarian In the case of Russia, the United States
rule over large areas is inherently should demand that it stop initiating
problematic, and all the more so in an frozen conflicts. As Putin attempts to
era of intensified ethnic, religious, and distract Russians from economic hard-
individual consciousness, when elec- ship, he will find it more tempting to
tronic communications can incite stir up trouble in his neighborhood.
identity-based grievances. No wonder Lithuania and Moldova probably top
the map of Eurasia is about to become his list of potential targets, given their
more complex. corrupt and easily undermined demo-
Policymakers in Washington had cratic governments. (Moldova is already
better start planning now for the poten- nearing the point of political anarchy.)
tial chaos to come: a Kremlin coup, a Both countries are also strategically
partial breakup of Russia, an Islamic valuable: Moldova could provide Russia
terrorist campaign in western China, with the beginning of a gateway to the
factional fighting in Beijing, and politi- Balkans, and Lithuania offers a partial
cal turbulence in Central Asia, although land bridge to the Russian exclave of
not probable, are all increasingly possible. Kaliningrad. For Putin, frozen conflicts
Whatever form the coming turbulence carry the advantage of being undeclared,
takes, it seems certain the United States reducing the odds of a meaningful
will be forced to grapple with new ques- Western response. That’s why the
tions of one sort or another. Who will response must be in kind: if Putin
control Russia’s nuclear arsenal if the makes behind-the-scenes moves in
country’s leadership splinters? How can Lithuania or Moldova, the West should
March/April 2016 39
Robert D. Kaplan
intensify sanctions against Russia and regional allies. Already, the U.S. Navy
increase the tempo of military exercises has begun freedom-of-navigation opera-
in central and eastern Europe. tions, however halfhearted, within the
At the very least, nato must dra- 12-nautical-mile boundary of sovereign
matically ramp up intelligence sharing authority that China has claimed around
among eastern European countries and its man-made islands. If these opera-
be ready to quickly deploy more aircraft, tions do not become regular and more
ground forces, and special operations explicit, China will not feel deterred.
forces to the region. The hundreds of
U.S. soldiers, marines, and sailors sta- A TIME FOR STRENGTH
tioned on a rotating basis in frontline Never before has U.S. President Theodore
nato states of the former Warsaw Pact Roosevelt’s adage, now a cliché, “Speak
constitute such a small presence that softly and carry a big stick” been more
they are unlikely to deter Russian aggres- applicable. A big stick can deter aggres-
sion; several battalions or even a brigade sion, whether it originates from strength
is needed. More broadly, the United or from weakness. But speaking softly
States will need to create a military is particularly germane when aggression
tripwire—one that deters Russia from arises out of weakness, since harsh
launching a limited strike across its rhetoric can needlessly provoke leaders
borders but does so without provoking a who already have their backs against
crisis. Thus, the U.S. counter to Russia’s the wall. Indeed, it is more important
growing “anti-access/area-denial” capa- for the United States to increase its own
bilities in the highly populated Baltic military presence in the Baltic states
region will have to be more fine-tuned and the South China Sea than it is to
than its response to China’s in the publicly condemn Moscow and Beijing
emptier South China Sea. for their actions in those areas.
Washington also needs to set clear A big stick means quickly restoring
redlines with China. In the South China the U.S. defense budget after the
Sea, it cannot allow the country’s land- devastation of sequestration. The U.S.
reclamation projects to graduate to the Army counted nearly 570,000 soldiers in
establishment of a so-called air defense 2010 and is set to shrink to 450,000 in
identification zone—airspace where 2017. The United States now stations
China reserves the right to exclude 33,000 land forces in Europe, down
foreign aircraft—as the regime declared from 200,000 during the Cold War.
in the East China Sea in 2013. Such Compared with ships and planes,
moves form part of a strategy of delib- ground troops constitute a more cred-
erate ambiguity: the more unclear and ible demonstration of U.S. power,
complex a military standoff becomes, because they advertise the country’s
the more threatened the United States’ willingness to shed blood to honor its
maritime dominance will be. If China commitments. Since war has become
does announce such a zone in the South increasingly unconventional, the United
China Sea, Washington must respond States no longer needs to station as
by increasing U.S. naval activity in the many ground forces in Europe as it
vicinity and expanding military aid to did during the Cold War, but a larger
40 f o r e i g n a f fa i r s
Eurasia’s Coming Anarchy
deployment is still called for. As for the side with the advantage “turns
naval assets, the Baltic Sea is too small plowshares into swords.” Strausz-Hupé
for the optimal use of an aircraft carrier had the Chinese and Soviet Communists
strike group, so the United States should in mind when he wrote those words. Yet
send more submarines to the region. the United States ultimately managed to
Washington should also reassure its fend off those adversaries through the
allies by limiting its rhetoric about trans- policy of containment, which was
national issues such as climate change protracted conflict in its own right.
to settings where it is strictly appropri- Containment wasn’t only about
ate. The president should never expect restraint, as many now like to believe;
Israelis, Poles, and Taiwanese, for exam- it was also about engaging in calculated
ple, to trust him because he is leading aggression and consistently reassuring
on climate change (as he has intimated allies. Throughout the Cold War, U.S.
they should); they want him to high- presidents prevailed while avoiding
light their own geopolitical dilemmas. nuclear war by understanding that
Although pandemics, rising sea levels, rivalry and conflict, rather than peace,
and other global challenges are real, the are normal. Today, as China and Russia
United States can afford the luxury of accelerate down the path of protracted
focusing on them thanks largely to its conflict, future U.S. presidents must
own protected geography. Many U.S. acknowledge that same truth. And
allies, by comparison, live dangerously they, too, must apply the right mix of
close to China and Russia and must strength and caution as they leave
contend with narrower, more traditional behind the comparatively calm decades
threats. Given their own tragic geography, of the Cold War and post–Cold War
Asian nations want to see more American eras and prepare to navigate the anarchy
warships in their waters. As for central of an unraveling Eurasia.∂
and eastern Europeans, they want a
muscular and unambiguous commitment
to their defense. Now more than ever,
because of the way globalization and the
communications revolution have made
geography more interconnected, an
American president risks losing his
reputation for power in one theater if
he fails to respond adequately to aggres-
sion in another.
In 1959, the political scientist Robert
Strausz-Hupé defined “protracted
conflict” as a state of sustained rivalry
that favors the side that is both patient
and able to “thrive upon conflict as the
normal condition of the twentieth
century.” Whereas the Western mindset
“sees only the tools of peace,” he wrote,
March/April 2016 41
Return to Table of Contents
A
lmost seven years after the Great entry into this debate, The Rise and Fall
Recession officially ended, the of American Growth, is likely to be the
U.S. economy continues to grow most interesting and important eco-
at a sluggish rate. Real wages are stag- nomics book of the year. It provides a
nant. The real median wage earned by splendid analytic take on the potency
men in the United States is lower today of past economic growth, which trans-
than it was in 1969. Median household formed the world from the end of the
income, adjusted for inflation, is lower nineteenth century onward. Gordon
now than it was in 1999 and has barely thinks Americans are unlikely to witness
risen in the past several years despite comparable advances again and forecasts
the formal end of the recession in 2009. stagnant productivity for the United
Meanwhile, the U.S. Federal Reserve States for the foreseeable future.
Board and the Congressional Budget Yet predicting future productivity
Office have taken more seriously the rates is always difficult; at any moment,
idea that U.S. productivity, one of the new technologies could transform the
most important sources of economic U.S. economy, upending old forecasts.
growth, may stay low. And such prob- Even scholars as accomplished as Gordon
lems are hardly unique to the United have limited foresight.
States. Indeed, productivity growth
has been slow in most of the developed THE GOLDEN AGE
world for some time. In the first part of his new book, Gordon
In the medium to long term, even argues that the period from 1870 to 1970
small changes in growth rates have was a “special century,” when the foun-
significant consequences for living dations of the modern world were laid.
Electricity, flush toilets, central heating,
TYLER COWEN is Professor of Economics at
George Mason University. Follow him on Twitter cars, planes, radio, vaccines, clean water,
@tylercowen. antibiotics, and much, much more
42 f o r e i g n a f fa i r s
Is Innovation Over?
The next big thing: the future, as seen from the 1950s
transformed living and working condi- vaccines, and clean water, transform
tions in the United States and much of society beyond the size of their share
the West. No other 100-year period in of gdp. But others do not, such as many
world history has brought comparable of the luxury goods developed since the
progress. A person’s chance of finishing 1980s. Gdp calculations do not always
high school soared from six percent in reflect such differences. Gordon’s analysis
1900 to almost 70 percent, and many here is mostly correct, extremely impor-
Americans left their farms and moved tant, and at times brilliant—the book
to increasingly comfortable cities and is worth buying and reading for this
suburbs. Electric light illuminated dark part alone.
homes. Running water eliminated water- Gordon goes on to argue that today’s
borne diseases. Modern conveniences technological advances, impressive as
allowed most people in the United they may be, don’t really compare to the
States to abandon hard physical labor ones that transformed the U.S. econ-
for good. omy in his “special century.” Although
In highlighting the specialness of computers and the Internet have led to
these years, Gordon challenges the some significant breakthroughs, such as
G R AP H I CA ART I S / G E T T Y I MAG ES
March/April 2016 43
Tyler Cowen
fewer flat tires, and have better sound pages. He covers a wide range of poten-
systems, but those are marginal, rather tially interesting topics, but few of them
than fundamental, changes. That shift— receive much depth or cohere into a useful
from significant transformations to narrative. He discusses the Great Chicago
minor advances—is reflected in today’s Fire of 1871 and the San Francisco
lower rates of productivity. earthquake of 1906; compares automo-
Consider the history of aviation. bile and maritime insurance; explains
Gordon notes that a Boeing 707 flight why the Homestead Act of 1862 and
from Los Angeles to New York took similar subsequent legislation passed
4.8 hours in 1958, which is actually in the nineteenth and early twentieth
somewhat shorter than the time it centuries that opened up millions of
takes today. In fact, since the wide- acres of land to settlers at low or no
spread adoption of the Boeing 707, cost were politically controversial; and
door-to-door air travel times have details the role of Philo Farnsworth of
increased due to the contemporary Rigby, Idaho, in developing the televi-
hassles involved in navigating airports sion set. These are all perfectly interest-
and all their security. Airplanes have ing set pieces, but they add little to his
become much safer, but the aviation argument. The book could have been at
sector has been surprisingly slow to least a hundred pages shorter, with no
make other major technological changes. loss and some gain.
Indeed, the DC-3, a highly practical, But the biggest problem with Gordon’s
all-purpose small plane that dates from book is his belief that he can forecast
the 1930s, still remains in use today, future economic and productivity growth
even in the United States. rates: specifically, he predicts that both
Gordon also explores how pensions will remain low in the United States.
and other workplace benefits have He cites the mediocre American educa-
eroded since the 1970s. For instance, tional system, rising income inequality,
the percentage of workers on a defined- government debt, and low levels of
benefit pension plan fell from 30 per- population growth, among other factors,
cent in 1983 to 15 percent in 2013. as unfavorable headwinds that are buffet-
Gordon’s treatment of this topic is a ing the U.S. economy. But although
useful rebuttal to the common claim these are very real problems, there are
that wage stagnation is an illusion other, more positive factors at play in
because unmeasured benefits on the the U.S. economy that Gordon is too
job have improved so much. The truth quick to dismiss and that make predict-
is that fewer workers as a percentage ing the future of economic and produc-
of the labor force now receive significant tivity growth a very difficult business.
benefits from their employers. Gordon brushes off such complexities
and offers a sustained defense of growth
FALSE PROPHET? forecasts: he assures readers that the
Gordon’s analysis is fascinating, but he French author Jules Verne made some
isn’t quite able to make his startling pretty good predictions back in 1863 and
revisionist thesis work at book length— that a December 1900 article in Ladies’
especially a book that’s more than 750 Home Journal foresaw some important
44 f o r e i g n a f fa i r s
aspects of the modern world, such as air
conditioning and cheap automobiles. But
Gordon doesn’t mention his own record
as a forecaster, which is decidedly mixed.
In 2000, he argued that the productivity
OPEN
innovations of the time didn’t measure
up to the gains of the past, and the same
year, he published another paper arguing
that the productivity benefits of comput-
ers were not as high as many people were
HOUSE
asserting. So far, so good. Online
What Gordon neglects to mention, Graduate
School
however, is that he is also the author of a
2003 Brookings essay titled “Exploding
Productivity Growth,” in which he Fair
optimistically predicted that productivity
in the United States would grow by 2.2
to 2.8 percent for the next two decades,
most likely averaging 2.5 percent a year;
he even suggested that a three percent March 8, 2016
rate was possible. Yet 2004, just after the
essay was published, was toward the tail
8am to 2pm EST
end of the period of high productivity
growth that had started in the 1990s, and Advance your degree.
since then, this number has tended to be Enrich your career.
closer to one percent. These days,
Gordon is offering forecasts of not much Find your path.
more than one percent for labor produc-
Connect with representatives
tivity growth and below one percent for
median income growth; in essence, he is of top programs in international
chasing the trends he has observed most affairs, public policy, and
recently. global business—all from
In the preface to his book, Gordon the convenience of your home
offers a brief history of the evolution or office and on any device.
of his views on productivity. Yet he
does not mention the 2003 essay, nor
does he explain why he has changed his Admission is free. All attendees
mind so dramatically. He also fails to are eligible to claim a free
cite other proponents of the stagnation six-month subscription to
thesis, even though most of their work ForeignAffairs.com.
predates his book. These precursors
include the economist Michael Mandel, www.foreignaffairs.com/openhouse
the Silicon Valley entrepreneur Peter
Thiel, and me. Mandel and I are rela-
45
Tyler Cowen
tively optimistic about the technological spaceships, and robots were widely
future of the United States, but we, along anticipated, few foretold the arrival of
with most informed participants in these x-rays, radio, lasers, superconductors,
debates, are skeptical about our ability nuclear energy, quantum mechanics, or
to forecast rates of economic and pro- transistors. No one knows what the
ductivity growth many years into the transistor of the future will be, but we
future or, for that matter, even a few should be careful not to infer too much
years ahead. from our own limited imaginations.
Even during Gordon’s special cen-
A GLASS HALF FULL tury of 1870–1970, progress was not
Ultimately, Gordon’s argument for why evenly distributed. There were pauses,
productivity won’t grow quickly in the such as much of the 1920s and 1930s,
future is simply that he can’t think of what between some especially fruitful periods.
might create those gains. Yet it seems Some pauses in advancement today
obvious that no single individual, not even should therefore not be alarming.
the most talented entrepreneur, can Gordon himself admits that informa-
predict much of the future in this way. tion technology was producing some
Consider just a few technological truly significant advances as recently
breakthroughs we could witness in the as the late 1990s and the very early
coming years, only a small number of years of this century.
which Gordon even mentions: significant Given that economic growth and
new ways to treat mental health, such as technological progress are uneven, there
better antidepressants; strong and effec- may well be bumps on the road when it
tive but nonaddictive painkillers; artificial comes to using computers to significantly
intelligence and smart software that improve human well-being. Surveying
could eliminate many of the most boring, the array of human talent in Silicon
repetitive jobs; genetic engineering; Valley, the advances that have taken
and the use of modified smartphones place to date, and the possible potential
for medical monitoring and diagnosis. I uses for new items such as smartphones,
can’t predict when such breakthroughs it is difficult to accept Gordon’s assertion
will actually happen. But it seems there that information technology has run its
is a good chance we’ll live to see some or course. It seems much more likely that
maybe all of them materialize, and they significant growth still lies ahead.
could prove to be major advances. And Gordon’s book serves as a powerful
although Gordon focuses on the demo- reminder that the U.S. economy really
graphic challenges the United States faces, has gone through a protracted slowdown
he never considers that today, thanks to and that this decline has been caused by
greater political and economic freedom all the stagnation in technological progress.
over the world, more individual geniuses But perhaps the book’s greatest contri-
have the potential to contribute to global bution to the debate over the world’s
innovation than ever before. economic future is that it unintentionally
It’s also worth remembering that many demonstrates the weakness of the case
past advances came as complete surprises. for pessimism.∂
Although the advents of automobiles,
46 f o r e i g n a f fa i r s
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F
rom Wall Street to K Street to gdp growth, a future in which economic
Main Street, pessimism about growth remains low would not be nearly
the global economy has become as bad as most people assume—provided
commonplace. The world economy may that the cost of living also continues
have finally emerged from the financial to fall.
crisis of 2008, but according to conven- This is more than just a problem of
tional wisdom, it remains fragile and perspective. The view that growth is
unsteady, just one disruption away from stagnating leads to a crisis mentality
yet another perilous downturn. that makes policymakers adopt mea-
In October, the International Mon- sures designed to boost growth: stimu-
etary Fund warned that a return to robust lus spending, tax cuts, investments in
global growth remained “elusive.” Others higher education. Some of these may
are gloomier. Former U.S. Treasury be beneficial, but they can also crowd
Secretary Larry Summers has said that out other actions that may be more
the world faces looming “secular beneficial: investing in greater efficiency,
stagnation”—a persistent period of low developing a leaner bureaucracy, and,
growth, low inflation, and low interest above all, establishing and securing a
rates—as the developed countries remain baseline minimum standard of living. A
caught in a deflationary trap, China society that followed these steps would
struggles with an uncertain transition be better off in the long run.
to a consumer economy, and the devel-
oping world reels from the collapse of BEYOND GDP
commodity prices and the contraction of Ever since the Great Depression, which
global credit. A rising chorus of voices coincided with the invention of measure-
is also warning of the dangers of income ments such as gdp, nearly everyone has
inequality, and no wonder: middle-class considered growth to be the most impor-
wages in the United States have been tant indicator of an economy’s health.
stagnant for more than three decades, Governments have risen and fallen
according to their ability to maximize
ZACHARY KARABELL is Head of Global prosperity as measured by increases in
Strategy at Envestnet and the author of The output and income (which includes
Leading Indicators: A Short History of the
Numbers That Rule Our World. Follow him on both wages and other sources of money,
Twitter @zacharykarabell. such as dividends).
March/April 2016 47
Zachary Karabell
48 f o r e i g n a f fa i r s
Learning to Love Stagnation
The price is right: shopping before Black Friday in Ohio, November 2014
adjusts for price changes and inflation, The combination of lower costs and
and for nominal gdp, which does not. less growth can lead to the same end-
And this contraction alarms not only point as higher costs and higher growth.
economists, such as Summers, but also But most economists and central bankers
most government officials, whose legiti- fear deflation even more than they fear
macy has become tethered to their ability inflation. They worry about a deflation-
to increase gdp growth. ary trap: if prices fall, people have less
But gdp growth is no longer an incentive to spend today, as they can
especially useful way of measuring the simply wait for cheaper prices tomorrow.
health of modern economies. Many of If consumers keep their wallets shut, the
the most important developments in economy will grind to a halt, resulting
the modern economy contribute little in falling prices, and the cycle contin-
BLOOM BE RG VIA G ET TY IMAG ES / DANI EL ACKE R
March/April 2016 49
Zachary Karabell
demand may hobble growth, but they decade, as it has in much of the world,
do not necessarily jeopardize prosperity. but that shift has not meaningfully
One country knows this better than eroded living standards for the bulk of
most: Japan. the population. What’s more, Japan’s
very high level of public debt hasn’t
WHAT JAPAN SYNDROME? led to financial collapse.
For almost three decades, since Japan’s Economic stagnation, in short, has
immense property and asset bubbles had little impact on the Japanese public’s
burst in 1991 and growth suddenly high quality of life. This realization has
decelerated, pundits from across the led to a wave of new thinking in Japan
political spectrum have used the country that emphasizes a “degrowth,” or post-
as a cautionary example of what can growth, model and focuses on well-
befall economies that become ensnared being rather than income or output.
in the trap of large amounts of govern- The massive success of the Japanese
ment debt, zero inflation, and little to no author Marie Kondo’s books on how
growth. Search the Internet for “Japan to pare down one’s belongings to the
syndrome” or “lost decade,” and you’ll essentials, rather than accumulate more
find scores of articles and papers address- and more stuff in a fruitless attempt to
ing the country’s purported malaise and generate happiness, encapsulates the
the lessons it offers to other societies emerging Japanese model. And the fact
hoping to avoid its fate. that her book has sold more than two
But the reality is that there is nothing million copies worldwide suggests that
really wrong with Japan. It may have the message is popular far beyond
negative real interest rates, an undervalued Japan’s shores.
currency, a debt-to-gdp ratio approach-
ing 250 percent, and an average annual MORE BANG FOR THE BUCK
gdp growth rate over the last decade of In the United States, meanwhile, inequal-
less than one percent. Yet it is also one ity and income stagnation rank among
of the richest and most stable countries voters’ most pressing concerns, according
in the world. to recent Gallup polls. Economic lumi-
On almost every major metric that naries such as James Galbraith, Paul
societies use to measure individual and Krugman, Branko Milanovic, Thomas
collective well-being, Japan ranks near Piketty, and Joseph Stiglitz have all
the top. Life expectancy is among the argued that inequality in income and
highest in the world; crime rates are wealth threatens the country’s very
among the lowest. The Japanese people democracy.
enjoy excellent health care and educa- Middle-class wages stopped rising
tion. The un Human Development more than 30 years ago, but it was only
Index, the Legatum Institute’s Prosper- with the financial crisis that this issue
ity Index, and the Better Life Index of became a pressing economic concern.
the Organization for Economic Coop- Before the crisis, a booming equity
eration and Development all regularly market, low interest rates, a soaring
give Japan high marks. Income inequal- housing market, and easy credit obscured
ity in Japan has increased in the past the problem, allowing people to bridge
50 f o r e i g n a f fa i r s
the gap between their stagnant incomes
and their spending. But when the crisis
hit, and credit contracted, that extra Not all readers
source of income evaporated.
But even though wages have flat- are leaders,
lined, so, too, have costs—which has
prevented living standards from declin- but all leaders
ing. Millions of families, of course,
have confronted unemployment and are readers.
falling incomes, and millions have been - Harry S. Truman
unable to meet their basic needs; their
stories rightly dominate the public
discussion. But overall, for a substantial
majority, shrinking costs and a wider SIGN UP for the
range of available goods and services Foreign Affairs
have offset the negative effects of Books & Reviews
newsletter
declining incomes.
Consider some of a family’s most
important expenses: food, energy, and
housing. In 1950, the average U.S.
household spent 30 percent of its income
on food. By the turn of the century, the
figure had fallen to 13 percent, and in
2013, it stood at just ten percent. (Not
surprisingly, that share is much higher
for the poor, but food stamps and other
government programs offset their ex-
penses.) Housing in major cities accounts
for a larger percentage of income than
it did in the mid-twentieth century, but
housing in general does not. And energy
expenditures have tumbled, thanks to
much greater energy efficiency in auto-
mobiles, better insulation for homes,
and, recently, cheap oil and gas.
As for the goods that households and
businesses consume, globalized supply
chains, along with the efficiencies gener-
ated by technology, have pushed down
their relative prices. Even lower-cost
goods imported from China have been
getting cheaper—by more than two
percent in the past three years, according ForeignAffairs.com/newsletters
to the U.S. Bureau of Labor Statistics.
51
Zachary Karabell
52 f o r e i g n a f fa i r s
Learning to Love Stagnation
March/April 2016 53
Return to Table of Contents
R
uth Porat has taken an unusual And the big challenge is, how do you
path to the tech world. Before think about resource allocation and
becoming the chief financial priorities when you have so many great
officer at Google in May 2015 (and then options? But wearing jeans instead of
at Alphabet, Google’s new parent com- suits and popping into driverless cars
pany, a few months later), she held the has also been a lot of fun.
same post at Morgan Stanley, where
among other roles she worked closely But is there anything particular to the
with the U.S. government to sort out Google approach that the larger busi-
the troubles at the insurance corpora- ness community, whether it’s banking or
tion aig and the mortgage-financing bricks and mortar, could profit from?
agencies Fannie Mae and Freddie Mac A key framework that we talk about quite
during the 2008 financial crisis. On the a bit, and that Larry [Page, Google’s
shortlist to become deputy treasury co-founder and now Alphabet’s ceo]
secretary in 2013 (before she withdrew articulated many years ago, is what he
her name), Porat, who Politico once calls “the 70-20-10 framework.” Seventy
referred to as “the most powerful woman percent of our resources should be focused
on Wall Street,” is now one of the most on our core business, 20 percent on
powerful women in Silicon Valley as well. adjacent emerging areas, and 10 percent
Some six months into the new job, she should be moon shots. But as he also very
met with Foreign Affairs’ managing editor, quickly says, even when you articulate
PAT R I C K T. FA L L O N / B L O O M B E R G V I A G E T T Y I M A G E S
Jonathan Tepperman, in New York to that kind of strategy, it’s still hard to get
discuss her move and the global economy. people to push out to the 20 and harder
to get them to go out to the 10. But if
Tell me about the transition from a you don’t do it, somebody else will.
Wall Street bank to the quintessential Another thing he said years ago is
Silicon Valley tech firm. Conventional that incrementalism in technology
wisdom holds that banks are stodgier leads to irrelevance; what you need is
than companies like Google. Is that revolutionary change. I think that view
true, and what lessons can Wall Street is true across all businesses. It’s easier
learn from Silicon Valley? to be in your comfort zone; it’s easier to
The transition was easier than I would do modest extensions. But you need to
really force yourself.
This interview has been edited and condensed.
54 f o r e i g n a f fa i r s
Porat in California,
April 2014
The Good News From Google
And have you created an institutional One thing that frustrated me when I was
structure for disruption within Google? in the industry was that we did embrace
Because this is something that big regulatory change early, but not everyone
institutions struggle with all the time: did. And there was a lot of resistance,
people become set in their ways, become and that delay was destructive. And
leery of contradicting the boss, and all we’re still slowly coming out of it.
that stifles innovation. As of today, at least in the United
That’s a great way to frame why we made States, there’s been a fundamental change
the move from Google to Alphabet. in banks. There’s more capital, more
Structurally, we wanted to give ourselves liquidity, and the nature of activity has
the room to not only have that 70-20-10 changed. [But] it will take some time to
be our mantra within Google—and it get to a position where people are more
unequivocally is: within Google we’re focused on how do you finance growth at
pushing the envelope in a lot of areas, the individual level, at the company level?
things like virtual reality, machine Pendulums swing. I think we’re still in
learning, the next billion users. But that slow swing, and I think the resistance
beyond that, we wanted the room to think to an appropriate response is one reason.
about the 20s and the 10s in new areas, If, on the other hand, you think about
like life sciences or driverless cars. the mission that we and many others in
Structurally, this gives us the ability to the tech world have, it’s really about
focus on the various “other bet” entities, making the user experience better every
to be a catalyst and a magnet for great day. In their earliest days, Larry and
entrepreneurs, in a way that may have Sergey [Brin, co-founder of Google] had
been more difficult under one umbrella. something famously called “the tooth-
brush test.” They wanted us to focus on
One other great contrast between improving things that billions of people
Silicon Valley and Wall Street is that use at least twice a day to make their lives
the public tends to see tech firms as better. And that’s a lot of what we do.
being beneficial to society, as creating There is a difference. We’re delighting
things of use, whereas it tends to see the user, and we’re seeing tremendous
Wall Street as being parasitic. Do you growth in the overall enterprise.
think that’s fair?
For many decades, the financial services The consensus among most prognosti-
industry wasn’t viewed that way. Then, cators is that we’re entering a phase of
after the financial crisis, banks were slow GDP growth around the world. Is
ranked only above Congress in public that as big a concern for the tech world
opinion surveys. There was clearly a lot as it is for more traditional industries?
of suffering. We needed to have a learn- I’ll answer a slightly different way. I’m
ing moment, where we stepped back often asked, what’s been my biggest
and looked at the fundamental flaws surprise since coming to Google, now
that enabled the industry to go down a Alphabet? And my answer is how early
path that resulted in the crisis. stage Google actually is. Given the scale
There were many elements to it: of the organization today, that’s a pretty
regulation, strategy, implementation. odd thing to say. But we’re riding some
56 f o r e i g n a f fa i r s
A Conversation With Ruth Porat
really important secular changes. Mobile You spoke about the multiplier
is still in its infancy. As I said, one of effect, but a lot of people worry that
our big strategies is getting the next technology, especially automation,
billion users online. Look at YouTube is playing a negative role by reducing
and the importance of the shift in adver- employment opportunities and
tising going online. Virtual reality is in causing wages to flatline.
its early days; machine learning is in It is easier to visualize the jobs that
its early days. Look what we’re doing will be eliminated than it is to envision
with the cloud and enterprise. the new industries that will come out
So what’s exciting for me is that of innovation. But when, for example,
we’re riding incredible tail winds. Of you look at the medical field, new tech-
course you’d rather have a better macro nologies created a whole new set of ana-
backdrop, but it’s substantially less lytical roles that needed to be filled. In
relevant. Many of the things we’re banking, the advent of atms created a new
doing, in particular in the other bets, set of jobs in the financial services area.
provide long-term growth opportuni- What I’m concerned about is that at
ties, and the macro ups and downs are a macro level, it’s easy to say there’s a
therefore much less relevant. multiplier effect. But you have to make
sure that the quality of work actually does
But isn’t the core of your revenue model go up at the individual level. Whether it’s
still based on advertising? And is that at the company level or at a macro level,
not sensitive to a secular slowdown? change is inevitable. It will happen. The
Advertising is. However, the reason question is, what do we do with the
I’m still defining it as a tail wind is that individuals who are caught in the middle?
more and more advertisers are finding How do we offer job training so that they
that you can target and measure more embrace it and end up also winning?
accurately by advertising online rather
than offline. The migration to online Another big input into productivity is
advertising is still very much in its infancy. new bodies: you need people entering
the labor stream with the right skills.
One of the main reasons growth is How worried are you about the growing
thought to be slowing is that productivity antipathy toward immigration not just
is declining. Do tech firms like yours in the United States but throughout
have the potential to help developed the developed world?
countries out of the productivity trap I am worried on two levels. It’s not just
they seem to be in? inconsistent with our values as a country—
Research suggests that for every tech I wasn’t born here; my family came here
job created in a metro area, five addi- [from the United Kingdom] because it
tional jobs are also created. And when was a land of opportunity—but it’s also
you look at how productive one can be economically unwise. Sixty percent of
in the workplace, the leverage you get the top 25 tech companies were founded
from the tools we have operating in the by first- or second-generation Americans.
cloud is pretty extraordinary. If you look at the Fortune 500, the figure
is 40 percent. Immigration has been a
March/April 2016 57
The Good News From Google
catalyst for innovation in this country system that’s affordable and works in a
for as long as one can recall. So I think slower-bandwidth environment.
it is extremely shortsighted.
When you look around the globe today,
How can firms like yours help people do you see any bright spots?
who may not be lucky, gifted, or edu- Many. I think the most challenging
cated enough to really engage in the aspect of my role has been resource
knowledge economy? prioritization, given how many exciting
Start with the mission of Google from opportunities there are. On a product
its earliest days: to organize the world’s level, I haven’t even commented on
information, make it as useful and what we’re doing in life sciences, for
applicable as possible. We give access to example. There our approach is to go
information in a really powerful way. from what we call “reactive medical
Or look at what we’re doing in care” to proactive care: to have continu-
schools. Our Chromebooks are highly ous diagnostics leveraging off of the
affordable and easy to set up, so they data-computing capacity that we have
provide teachers with a powerful tool. within Alphabet. So there are areas like
We then layer on things like what we’re that where we’re transforming industries.
doing in virtual reality, for example. Another example is driverless cars
We have something called Cardboard, and what that means for reimagining
which lets you slide your phone into a what cities can be.
very inexpensive, little cardboard pack- On a geographic level, I think the
aging and create a virtual reality tool. opportunity to help and work with so
Through Google.org, we’re doing a lot many emerging markets where people
on computer science training for kids, are still coming online is pretty extraor-
for women, for underrepresented dinary. And it’s not just about the devices.
groups generally. For example, we’re looking at ways to
provide connectivity to parts of the
Describe the analogous efforts you’re world where it’s hard to implement
making internationally to bring more the methods we have historically used
people into the digital flow. in the developed world.
We started something called Google for
Entrepreneurs to help entrepreneurs in A recent analysis of the tech industry
home markets understand how they can looked at the 15 biggest firms in the year
take ideas from inception to launch. 2000 and found that they’ve since lost
We’re trying to leverage all that we’ve about 60 percent of their value. Mean-
learned by serving as advisers, helpers, while, the fourth, fifth, and sixth most
catalysts—however you want to define it. valuable firms today are Alibaba, Tencent,
The types of products we’re designing and Baidu: all Chinese. Do you think the
also differ in different markets. The erosion of U.S. dominance in high tech is
emerging markets don’t have the band- a bad thing or a good thing?
width we do here, so we created what we I think the pace of innovation globally is
call Android One, which is a slimmed- extraordinary and is a positive thing. We’re
down version of the mobile operating very respectful of the fact that innovation is
58 f o r e i g n a f fa i r s
occurring around the globe. We’re a global
company, and we want to be a part of it.
It’s an extraordinarily competitive market,
and it puts pressure on us every day.
But the bigger part of your question
is, how do I think about the future? And directory
I think it really goes back to Larry’s
mantra: incrementalism leads to irrel- Subscriber Services
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59
The Good News From Google
60 f o r e i g n a f fa i r s
SOLUTION D R I V E N
PA C I F I C F O C U S E D
GLOBAL R E S U L T S
Fight or Flight
America’s Choice in the Middle East
Kenneth M. Pollack
T
he modern Middle East has rarely been tranquil, but it has
never been this bad. Full-blown civil wars rage in Iraq, Libya,
Syria, and Yemen. Nascent conflicts simmer in Egypt, South
Sudan, and Turkey. Various forms of spillover from these civil wars
threaten the stability of Algeria, Jordan, Lebanon, Saudi Arabia, and
Tunisia. Tensions between Iran and Saudi Arabia have risen to new
heights, raising the specter of a regionwide religious war. Israel and
the Palestinians have experienced a resurgence of low-level violence.
Kuwait, Morocco, Oman, Qatar, and the United Arab Emirates have
weathered the storm so far, but even they are terrified of what is going
on around them. Not since the Mongol invasions of the thirteenth
century has the Middle East seen so much chaos.
Moreover, it is unlikely to abate anytime soon. No matter how
many times Americans insist that the people of the Middle East will
come to their senses and resolve their differences if left to their own
devices, they never do. Absent external involvement, the region’s lead-
ers consistently opt for strategies that exacerbate conflict and feed
perpetual instability. Civil wars are particularly stubborn problems,
and without decisive outside intervention, they usually last decades.
The Congolese civil war is entering its 22nd year, the Peruvian its
36th, and the Afghan its 37th. There is no reason to expect the Middle
East’s conflicts to burn out on their own either.
As a consequence, the next U.S. president is going to face a choice in
the Middle East: do much more to stabilize it, or disengage from it much
more. But given how tempestuous the region has become, both options—
stepping up and stepping back—will cost the United States far more
than is typically imagined. Stabilizing the region would almost certainly
62 f o r e i g n a f fa i r s
require more resources, energy, attention, and political capital than most
advocates of a forward-leaning U.S. posture recognize. Similarly, giving
up more control and abandoning more commitments in the region would
require accepting much greater risks than most in this camp acknowl-
edge. The costs of stepping up are more manageable than the risks of
stepping back, but either option would be better than muddling through.
March/April 2016 63
Kenneth M. Pollack
64 f o r e i g n a f fa i r s
Fight or Flight
out in nearly all Arab countries and the toppling or crippling of the
regime in five of them. But revolutions are always tricky things to get
right. That has proved especially true in the Arab world, where the
autocrats in each country had done a superb job of eliminating any
charismatic opposition leader who might have unified the country after
the fall of the regime and where there were no popular alternative
ideas about how to organize a new Arab state. And so in Libya, Syria,
and Yemen, the result has been state failure, a security vacuum, and
civil war.
If the first-order problem of the Middle East is the failure of the
postwar Arab state system, the outbreak of civil wars has become an
equally important second-order problem. These conflicts have taken
on lives of their own, becoming engines of instability that now pose
the greatest immediate threat to both the people of the region and the
rest of the world.
For one thing, civil wars have a bad habit of spilling over into their
neighbors. Vast numbers of refugees cross borders, as do smaller, but
no less problematic, numbers of terrorists and other armed combatants.
So do ideas promoting militancy, revolution, and secession. In this
way, neighboring states can themselves succumb to instability or even
internal conflict. Indeed, scholars have found that the strongest pre-
dictor that a state will experience a civil war is whether it borders a
country already embroiled in one.
Civil wars also have a bad habit of sucking in neighboring coun-
tries. Seeking to protect their interests and prevent spillover, states
typically choose particular combatants to back. But that brings them
into conflict with other neighboring states that have picked their own
favorites. Even if this competition remains a proxy fight, it can still be
economically and politically draining, even ruinous. At worst, the
conflict can lead to a regional war, when a state, convinced its proxy is
not doing the job, sends in its own armed forces. For evidence of this
dynamic, one need look no further than the Saudi-led intervention in
Yemen, or Iranian and Russian military operations in Iraq and Syria.
WITHDRAWAL SYMPTOMS
As if the failure of the postwar Arab state system and the outbreak of
four civil wars weren’t bad enough, in the midst of all of this, the
United States has distanced itself from the region. The Middle East
has not been without a great-power overseer of one kind or another
March/April 2016 65
Kenneth M. Pollack
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Fight or Flight
In his 2009 speech in Cairo, Obama did claim that the United
States would try to help the region shift to a new Arab state system,
but he never backed his speech up with an actual policy, let alone
resources. Then, in 2011, the administration failed to put in place a
coherent strategy to deal with the Arab Spring, one that might have
assisted a transition to more stable, pluralistic systems of government.
Having missed its best opportunities, Washington now barely pays lip
service to the need for gradual, long-term reform.
As for the civil wars, the administration has focused on addressing
only their symptoms—trying to contain the spillover—by attacking the
Islamic State, or isis; accepting some refugees; and working to prevent
terrorist attacks back home. But the history of civil wars demonstrates
that it is extremely hard to contain the
spillover, and the Middle East today is
proving no exception. Spillover from
Even as the Middle East
Syria helped push Iraq back into civil careens out of control, help
war. In turn, spillover from the Iraqi and is not on the way.
Syrian civil wars has generated a low-
level civil war in Turkey and threatens to do the same in Jordan and
Lebanon. Spillover from Libya is destabilizing Egypt, Mali, and Tuni-
sia. The Iraqi, Syrian, and Yemeni civil wars have sucked Iran and the
Gulf states into a vicious proxy war fought across all three battlefields.
And refugees, terrorists, and radicalization spilling over from all these
wars have created new dilemmas for Europe and North America.
In fact, it is effectively impossible to eradicate the symptoms of civil
wars without treating the underlying maladies. No matter how many
thousands of refugees the West accepts, as long as the civil wars grind
on, millions more will flee. And no matter how many terrorists the
United States kills, without an end to the civil wars, more young men
will keep turning to terrorism. Over the past 15 years, the threat from
Salafi jihadism has grown by orders of magnitude despite the damage
that the United States has inflicted on al Qaeda’s core in Afghanistan.
In places racked by civil war, the group’s offshoots, including isis, are
finding new recruits, new sanctuaries, and new fields of jihad. But where
order prevails, they dissipate. Neither al Qaeda nor isis has found much
purchase in any of the remaining strong states of the region. And when
the United States brought stability to Iraq beginning in 2007, al Qaeda’s
franchise there was pushed to the brink of extinction, only to find
salvation in 2011, when civil war broke out next door in Syria.
March/April 2016 67
Kenneth M. Pollack
STEPPING UP
Stabilizing the Middle East will require a new approach—one that
attacks the root causes of the region’s troubles and is backed up by
adequate resources. The first priority should be to shut down the
current civil wars. In every case, that will require first changing the
battlefield dynamics to convince all the warring factions that military
victory is impossible. In an ideal world, that would entail sending
at least small numbers of U.S. combat forces to Iraq (perhaps
10,000) and potentially Syria. But if the political will for even a
68 f o r e i g n a f fa i r s
Fight or Flight
March/April 2016 69
Kenneth M. Pollack
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STEPPING BACK
If the next U.S. president is unwilling to commit to stepping up to
stabilize the Middle East, the only real alternative is to step back from
it. Because civil wars do not lend themselves to anything but the right
strategy with the right resources, trying the wrong one means throwing
U.S. resources away on a lost cause. It probably also means making
the situation worse, not better. Under a policy of real disengagement,
the United States would abstain from involvement in the civil wars
altogether. It would instead try to contain their spillover, difficult as
that is, and if that were to fail, it would fall back on defending only
core U.S. interests in the Middle East.
The Obama administration has done a creditable job of bolstering
Jordan against chaos from Iraq and Syria so far, and stepping back
March/April 2016 71
Kenneth M. Pollack
from the region could still entail beefing up U.S. support to Jordan
and other at-risk neighbors of the civil wars, such as Egypt, Lebanon,
Tunisia, and Turkey. All these countries want and need Western eco-
nomic, diplomatic, technical, and military assistance. But because
spillover has historically proved so difficult to contain, there is a high
risk that one or more of them could still slide into civil war them-
selves, generating yet more spillover.
For that reason, stepping back would also require Washington to
make a ruthless assessment of what is the least the United States can
do to secure its vital interests in the Middle East. And although it
may be a gross exaggeration to say so, in large part, U.S. interests in
the region do ultimately come down to Israel, terrorism, and oil.
As poll after poll has found, a majority of Americans continue to
see the safety of Israel as important to them and to the United States.
Yet Israel today is as safe as the United States can make it. Israeli forces
can defeat any conventional foe and deter any deterrable unconven-
tional threat. The United States has defended Israel diplomatically
and militarily countless times, including implicitly threatening the
Soviet Union with nuclear war during the 1973 Yom Kippur War. The
United States has even taken an Iranian nuclear threat off the table for
at least the next decade, thanks to the deal it brokered last year. The
only threat the United States cannot save Israel from is its own chronic
civil war with the Palestinians, but the best solution to that conflict is
a peace settlement that neither the Israelis nor the Palestinians have
demonstrated much interest in. In short, there is little more that
Israel needs from the United States for its own direct security, and
what it does need (such as arms sales) the United States could easily
provide even if it stepped back from the Middle East.
Perhaps the greatest advantage of a reduced U.S. presence in the Mid-
dle East is that it should mitigate the threat from terrorism. Terrorists
from the region attack Americans largely because they feel aggrieved by
U.S. policies, just as they attack France and the United Kingdom because
those countries are staunch U.S. allies (and former colonial powers) and
have started to attack Russia because it has intervened in Syria. The less
the United States is involved in the Middle East, the less its people are
likely to be attacked by terrorists from the region. It is no accident that
Switzerland does not suffer from Middle Eastern terrorism.
Of course, even if Washington disengaged from the region as much
as possible, Americans would not be entirely immune from Middle
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Kenneth M. Pollack
NO EXIT
Ultimately, the greatest challenge for the United States if it steps back
from the Middle East is this: figuring out how to defend U.S. interests
when they are threatened by problems the United States is ill equipped
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T
he downing of a Russian passenger plane over Egypt’s Sinai
Peninsula last October, for which the Islamic State (also
known as isis) claimed responsibility, may ultimately prove
more consequential than the horrific attacks in Paris and San Ber-
nardino, California, that followed. Western security officials had long
worried that their countries’ own citizens would conduct attacks after
returning home from Iraq or Syria or strike out as “lone wolf” terror-
ists. But the Russian plane crash, which killed 224 people, was caused
by a different beast: neither lone wolves nor isis itself but an isis
affiliate that had pledged its loyalty to Abu Bakr al-Baghdadi, isis’
self-declared caliph. Isis calls these groups wilayat, Arabic for
“provinces.” (The term is borrowed from the seventh century, when
the armies of Islam burst out of the Arabian Peninsula and established
regional governors who ruled in the name of the caliph; isis also uses
wilayat to refer to administrative divisions within Iraq and Syria.) If,
as recent events suggest, isis’ far-flung provinces have begun closely
aligning their actions with those of the group’s core leadership in Iraq
and Syria, then isis’ geographic scope has expanded vastly.
Although alarming, such expansion is not unprecedented. After 9/11,
several of al Qaeda’s affiliates eclipsed that group’s central command in
both size and importance. One of them, al Qaeda in the Arabian Pen-
insula (aqap), has repeatedly tried to down U.S. airplanes and remains
a deadly threat today. Aqap claimed responsibility for the January 2015
Charlie Hebdo attack in Paris, and last May, Michael Morell, a former
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ISIS Goes Global
deputy director of the cia, said that aqap retained “the ability to bring
down an airliner in the United States of America tomorrow.”
Isis itself also began as an al Qaeda franchise. Following the U.S.
invasion of Iraq in 2003, Abu Musab al-Zarqawi emerged as a leader
of jihadist forces in Iraq. In 2004, he pledged allegiance to Osama bin
Laden and changed his organization’s name from the Organization of
Monotheism and Jihad to al Qaeda in Iraq (aqi). After Zarqawi’s
death, in 2006, the group took on other names, including the Islamic
State of Iraq. When Baghdadi took over in 2010, the organization was
on its last legs. Local Sunnis had turned against it, undermining its
operations. When U.S. forces pulled out of the country in 2011, the
Iraqi government they left behind seemed ascendant.
But Baghdadi’s group rose from the ashes, exploiting the marginal-
ization of Iraqi Sunnis and the Syrian civil war. In 2013, Baghdadi
changed his group’s name yet again, to the Islamic State of Iraq and
al-Sham. In 2014, after his fighters captured the Iraqi city of Mosul,
his ambitions grew further: he declared a caliphate over the Muslim
world, shortening the group’s name to the Islamic State. Now, isis has
eclipsed al Qaeda in size and strength; it has also outpaced its former
master in spawning affiliates, establishing ever-larger numbers of
franchises and supporters throughout the Muslim world.
The provinces pose a serious threat to Western interests: they en-
able isis to expand its reach and make local groups more deadly in
their regional conflicts. Hotbeds of jihad that have not yet exported
terrorism to the West may do so in the future if local groups strengthen
their ties to isis.
Yet the United States and its allies are only just beginning to factor
the provinces into their counterterrorism strategy. In his last major
address on isis, in December, U.S. President Barack Obama focused
on the terrorist threat that the group’s core in Iraq and Syria posed to
the United States, without even mentioning the group’s provinces.
The Pentagon has been taking the danger more seriously and has
considered establishing additional military bases in Africa, Asia, and
the Middle East partly in response. But the United States and its allies
must go further, developing a comprehensive strategy to weaken isis’
various franchises. They should start by taking advantage of the tensions
that will probably arise between isis’ leadership in Iraq and Syria and
its more remote branches. Al Qaeda’s affiliates eventually became a
burden for its core, demanding resources, ignoring its directives, and
March/April 2016 77
Daniel Byman
GOING BIG
As is well known, the heart of isis lies in the Sunni-populated parts
of Iraq and Syria, and the organization’s core splits its headquarters
between Mosul and Raqqa. Yet isis claims to be the legitimate ruler
of all Muslims, and it operates throughout the Muslim world. It has
already declared wilayat in parts of Afghanistan, Algeria, Egypt, Libya,
Nigeria, Pakistan, Saudi Arabia, Yemen, and the Caucasus. Terrorists
or fighters operating in isis’ name have also conducted attacks in
Bangladesh and Kuwait.
So far, the most worrisome provinces are those in Egypt and Libya.
The Egyptian affiliate, Sinai Province, which used to call itself Ansar
Beit al-Maqdis, pledged loyalty to Baghdadi in 2014. At first, this oath
seemed to mean little, and the group’s fighters continued to focus
their attacks on Egypt’s military and police. But they soon began to
raise their ambitions, going after un targets, beheading a Croatian
expatriate (supposedly in revenge for Croatia’s participation in the
international anti-isis coalition), and attacking the Italian consulate
in Cairo. And then they downed the Russian airliner.
The Libyan province emerged from the strife that followed the
overthrow of the Libyan dictator Muammar al-Qaddafi in 2011. Qaddafi
had faced a jihadist threat for years, and as countrywide unrest turned
to outright conflict, local jihadists became more powerful. As isis
began to grab headlines, its brand became more compelling to local
fighters; a courtship blossomed, and Libyan fighters pledged their
loyalty to Baghdadi in 2014.
Today, the Libyan affiliate poses a particularly serious threat to
Western interests because its fighters, unlike their counterparts in Egypt,
do not face strong government opposition. The group has as many as
3,000 active members, and its fighters have beheaded Ethiopian Coptic
workers and attacked the Moroccan and South Korean embassies.
Although the group’s fighters have not yet mounted an international
attack, they hold the Mediterranean city of Sirte and adjacent towns
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When local goes global: in Paris after the Charlie Hebdo attack, January 2015
along the Libyan coast, where they’ve created a mini-caliphate, dispens-
ing brutal justice and enforcing social codes as the core organization
does in its Iraqi and Syrian heartlands.
Figuring out where exactly isis has established a formal presence and
where local fighters are merely emulating the group can be difficult. In
Bangladesh, isis has claimed responsibility for bombings, stabbings,
and shootings of Shiite and Western targets, but it is unclear if these
attacks are directly linked to the core group. Nigeria’s Boko Haram has
endorsed and sworn loyalty to isis, but the Nigerian extremist group
has multiple commanders, and these claims have not been matched by
any significant change in operations, suggesting that the relationship
between the two groups remains more distant than it may seem.
In places where isis does have a more formal presence, foreign fight-
ers play an important role creating and maintaining ties between the
local group and the core. More than any other modern terrorist group,
REUTERS / GONZALO FU ENTES
isis relies on volunteers from abroad: by the end of 2015, roughly 25,000
foreigners from Arab countries and 5,000 from Western states had
fought with it in Iraq and Syria, and the ranks of outsiders keep grow-
ing. These fighters act as communication channels, bringing local
concerns to isis and Baghdadi’s vision back to their countries of origin
when they return. When the so-called Afghan Arabs, who had fought
with the mujahideen against the Soviet Union in the 1980s, returned
March/April 2016 79
Daniel Byman
home, they spread their ideology to local groups, giving al Qaeda infor-
mal networks throughout the Muslim world. Today, isis is engaged in
similar activity, but more rapidly and on a far more massive scale, even
winning over groups formerly linked to al Qaeda. Many of these groups,
particularly those in North Africa, worked frequently with isis when it
was still an al Qaeda affiliate.
Accepting the isis label often leads local groups to shift their tactics
and ideology. In addition to fighting local government forces and rival
groups as they did before, many affiliates begin making sectarian attacks
and targeting Westerners in the region. In a particularly brutal but
effective form of violent propaganda, they often behead their victims
and carefully choreograph and videotape the executions for broad dis-
semination. When possible, as in parts of Libya, provinces also adopt an
isis-style governance structure, complete with police, courts, and taxes.
Unlike some of al Qaeda’s affiliates, they do not try to form lasting alli-
ances with other rebel groups, and they tend to have little respect for
local authority figures, with tribal leaders an important exception.
So far, however, no isis province has attacked targets in the West.
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Daniel Byman
GOING TO EXTREMES
As isis grows beyond Iraq and Syria, so, too, does it spread its harsh
brand of religious intolerance. In 2015, the group’s followers attacked
Shiite mosques in Kuwait, Saudi Arabia, and Yemen; beheaded Egyp-
tian and Ethiopian Christians in Libya; and attacked security forces
and Sunni Muslims deemed insufficiently devout. Not only are such
attacks tragic in their own right; they also risk setting in motion a
cycle of retaliation, as has already happened in Yemen. Such cycles,
which lead to revenge attacks against Sunnis, only bolster the group’s
claim to being a defender of the faithful.
Growing sectarianism also threatens the legitimacy of the govern-
ments of Bahrain, Kuwait, Saudi Arabia, and other religiously divided
countries. In Saudi Arabia, for example, the government currently
finds itself in a dilemma: if it fails to stop isis from bombing Saudi
Shiite mosques, it will embolden the extremists and show that it can-
not protect its own people; yet if it cracks down on isis, it will risk
looking like the champion of the country’s unloved Shiite minority,
which could hurt its legitimacy among Sunni chauvinists.
The spread of isis will also worsen the region’s refugee crisis. The group
embraces barbarism as strategy; beheadings, rape, and other grotesque acts
are not byproducts of its wars but deliberate tools to intimidate enemies
and reward supporters. In retaliation for a tribal revolt in Libya in August
2015, isis fighters killed dozens of members of the tribe, crucifying several
of them in a traffic circle—a punishment familiar to anyone following the
group’s parade of horrors in Iraq and Syria. If the provinces expand, many
Muslims and religious minorities will flee rather than endure their rule.
From the West’s perspective, however, the bigger concern is that as isis
grows, it will develop new staging grounds and operatives to use for
international terrorist attacks. Baghdadi has called on Muslims abroad to
travel to Iraq and Syria or to the provinces, if they can; if they cannot, he
has said they should focus on local attacks. Gone are the days when West-
ern governments had to worry about only the foreign fighters traveling
to Iraq and Syria; increasingly, they have to worry about would-be jihadists
traveling to and from other isis bases around the region and beyond.
DOUBLE TROUBLE
Despite all the benefits provinces offer isis, they also come with their
share of trouble. For one thing, they can weaken the jihadist movement
as a whole. Many of them exist because of local rivalries: members of
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rival groups spend their time killing one another rather than fighting
their supposed enemies. In Afghanistan, for example, the Taliban and
a renegade faction that has pledged loyalty to isis have warred for
control of Helmand Province, weakening both of them in their fight
against the Afghan government.
Just as al Qaeda did, isis may soon learn that not all affiliates are
obedient servants. When local groups, particularly strong ones, take on
the isis label, they retain their own command structure, personnel, and
parochial goals, and these often fit uneasily with those of the core
group. Time and again, al Qaeda found that many of its regional fran-
chises retained their traditional agendas, continuing to fight the local
fights they always had (although perhaps adding some local Western
targets to the mix). Al Qaeda’s leaders
had particular difficulty controlling aqi, Just as al Qaeda did, ISIS
which they thought spent too much en-
ergy killing ordinary Shiites and Sunni may soon learn that not all
imams and other leaders who opposed affiliates are obedient
the group. When aqi bombed three servants.
hotels in Amman, Jordan, in 2005, kill-
ing some 60 people, roughly 200 Islamic
scholars from 50 countries condemned the group, calling the killing of
noncombatants “among the gravest of sins.” The ferocious criticism
tarnished al Qaeda’s brand among many of its Muslim constituents.
As isis absorbs local groups, it will also take on the enemies they
make. Western officials told The New York Times that when the lead-
ers of Sinai Province decided to bomb the Russian plane, they did so
without consulting isis. The move provoked Russia, which until
then had limited its air strikes in Syria to attacks on the moderate
opposition, to launch cruise missiles at isis’ forces and infrastructure
in Deir ez-Zor and Raqqa, among other targets.
This process works both ways; local groups that link up with isis can
also get themselves into trouble, painting bull’s-eyes on their backs.
Again, the experience of al Qaeda is instructive. In 2010, bin Laden
discouraged the Somali militant group al Shabab from declaring alle-
giance to his organization because doing so would give “enemies” an
excuse to mobilize against al Shabab. Something similar is happening
now. Before the extremist groups in Egypt and Libya pledged allegiance
to isis, the United States cared little about them. Now it has zeroed in
on them. In November 2015, for example, a U.S. air strike near the port
March/April 2016 83
Daniel Byman
city of Darnah, Libya, killed an Iraqi who may have been the leader of
isis’ affiliate there. By attacking local governments, the provinces also
risk pushing local regimes into the arms of the anti-isis coalition.
Joining up with isis can also cost affiliates local support. Outside ter-
rorist groups tend to be less in tune with conditions on the ground than
their native-born associates are. In 2003, for example, the al Qaeda
core pushed its Saudi affiliate to launch an insurgency prematurely,
despite local leaders’ warnings that they were not prepared. The result
was a disaster: after the group conducted several terrorist attacks
against Western targets in the kingdom and strikes on Saudi security
forces, the Saudi government cracked down, killing or arresting most
of the group’s members. Because foreign fighters lack grass-roots con-
nections, they also have few incentives to exercise restraint. When isis
tried to set up shop in Darnah in 2014, for example, its brutal behavior
alienated residents, who worked with rival groups to expel it. The
most successful terrorist groups, such as Hamas and Hezbollah, enjoy
close ties with their local populations. They use violence, but they also
carefully moderate their brutality. Isis has yet to learn that lesson.
A NEW STRATEGY
Last year, it did not seem to matter that the United States and its allies
had no clear strategy for dealing with isis’ provinces. Neither Wash-
ington nor its friends were eager to take on yet another messy fight in
the Middle East. Indeed, targeting the provinces appeared counter-
productive: if the groups were locally focused, then bombing them
might just provoke them to attack the West. Yet the attack on the
Russian plane exposed the danger of this line of thinking. Ignoring the
provinces risks allowing isis to grow stronger and more dangerous.
Any strategy aimed at weakening the provinces must include two parts:
severing the link between the core group and the affiliates and attempt-
ing to contain, weaken, and defeat the affiliates themselves. To that end,
the United States and its allies should target provincial command-and-
control centers and locals who have personal relationships with top isis
leaders in Iraq and Syria. Deprived of instruction from headquarters, the
provinces will be forced to go their own way, which could create a world
of new problems for isis’ core, costing them local allies.
To fight isis as it spreads, the United States will need military
bases in many remote parts of the world. Flexibility will be vital, since
it is hard to predict which provinces will expand and demand the
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most attention. (Yemen, for example, was not a major concern for
U.S. counterterrorism officials until 2009, when the so-called under-
wear bomber, who had been based there, nearly downed an airplane
over Detroit.) To gain the right geographic reach and to ease the burden,
the United States should also work with its allies. France, for instance,
is committed to the anti-isis coalition and has a strong military presence
in North Africa. The United States should divvy up responsibilities
and coordinate operations with France there.
The United States and its allies should also seek to weaken the prov-
inces by portraying the core group as out of touch with local grievances
in the news and on social media. This tactic is more likely to work in
countries where anti-foreign sentiment is particularly strong, such as
Somalia, than in places where national identity is weaker, such as Libya.
Washington also needs to strengthen the states where isis affili-
ates have set up shop. It should provide aid and training to military,
police, and intelligence forces in such places. It should also offer to
help these countries improve their administrative capacity through
judicial reform and social service provision and assist them in securing
their borders by building barriers, improving surveillance, and train-
ing border troops. In countries without a functioning government,
such as Libya, the United States may have to work with local militias
and tribes.
Diasporas that are involved in civil wars in their homelands, such
as the Somali diaspora, are also a counterterrorist concern. Until now,
such struggles have been primarily local, and so if a member of the
diaspora felt compelled to take up arms, he often posed little threat to
his host country. If groups such as al Shabab embrace isis, however,
the threat may grow. But diasporas can also provide an opportunity,
since it is far easier to gather intelligence from the members of a diaspora
community than from their brethren back home. In many cases, the
best way to gain leads is to work with the communities themselves;
the less they feel alienated, the more likely they will be to report any
troublemakers in their midst.
In all these ways, Washington must integrate isis’ many provinces
into the overall U.S. strategy against the group. Left unchecked, these
regional affiliates will increasingly threaten the Middle East and the
rest of the world. But with the right policies, the United States and its
allies can do serious damage to both the provinces and their masters,
turning a mutually beneficial relationship into a disaster for both.∂
March/April 2016 85
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D
espite China’s recent economic struggles, many economists
and analysts argue that the country remains on course to
overtake the United States and become the world’s leading
economic power someday soon. Indeed, this has become a mainstream
view—if not quite a consensus belief—on both sides of the Pacific.
But proponents of this position often neglect to take into account an
important truth: economic power is closely related to business power,
an area in which China still lags far behind the United States.
To understand how that might affect China’s future prospects, it’s
important to first grasp the reasons why many remain bullish on
China—to review the evidence that supports the case for future Chi-
nese dominance. At first glance, the numbers are impressive. China’s
gdp is likely to surpass that of the United States—although probably
not until at least 2028, which is five to ten years later than most
analysts were predicting before China’s current slowdown began in
2014. After all, China is already the world’s largest market for hun-
dreds of products, from cars to power stations to diapers. The Chinese
government has over $3 trillion in foreign exchange reserves, which is
easily the world’s largest such holding. And China overshadows the
PANKAJ GHEMAWAT is Global Professor of Management and Strategy at New York
University’s Stern School of Business and Anselmo Rubiralta Chair of Strategy and
Globalization at the University of Navarra’s IESE Business School. Follow him on Twitter
@PankajGhemawat.
THOMAS HOUT teaches strategy at the Middlebury Institute of International Studies at
Monterey, the Fletcher School of Law and Diplomacy at Tufts University, and the University
of Hong Kong’s School of Business.
86 f o r e i g n a f fa i r s
Can China’s Companies Conquer the World?
United States in trade volume: of the 180 nations with which the two
countries both trade, China is the larger trading partner with 124,
including some important U.S. political and military allies. Finally,
China has made steady progress toward its goal of becoming the
investor, infrastructure builder, equipment supplier, and banker of
choice in the developing world. Much of Asia, Africa, and Latin
America now depends on China economically and politically.
Since Chinese share prices tumbled last summer and then again
earlier this year, investors have grown wary of the country’s stock mar-
ket. But that market has been largely irrelevant to China’s economic
growth: from 1990 to 2013, as Chinese gdp grew at roughly ten per-
cent annually, the stock market barely moved. Its recent gyrations
are no more indicative of China’s overall economic well-being than
was its long stagnation. China will likely recover from its current eco-
nomic setbacks just as the United States recuperated after wild stock
market swings and a major depression in the first half of the twentieth
century.
But strong macroeconomic data don’t tell the whole story, and
China’s likely short-term recovery will mean little in the longer run.
The fact is that China’s success to date doesn’t necessarily mean that
it will surpass the United States as the world’s leading economic
power. Metrics such as gdp, trade volume, and financial reserves
all reflect economic power. But they don’t entirely encompass it, for
underneath those numbers lies the real world of corporations and
industries that actually create growth and wealth. And a close look at
the performance and prospects of Chinese firms reveals the obstacles
the country still faces.
In both China and the United States, corporations account for roughly
three-quarters of gdp. More generally, multinational corporations
and their supply chains control 80 percent of global exports and for-
eign direct investment. In other words, economic power rests heavily
on business power.
China’s economy exploded during the last three decades thanks to
the extraordinary performance of its low-cost manufacturers—reliable,
responsive companies that make the apparel and household items that
fill Walmart’s shelves. The Chinese state created the conditions for
such firms to thrive by upgrading China’s infrastructure, attracting
foreign investment, and keeping the value of China’s currency relatively
low. But to succeed, Chinese manufacturers still had to outperform
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But can you make a semiconductor? A factory in Anhui Province, China, May 2015
remains broadly dependent on Western technology. In the areas that
will matter most in the twenty-first century, Chinese companies have
a long way to go, which should give pause to anyone confidently
predicting a not-too-distant era of Chinese economic dominance.
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And in the latter case, China’s industrial policy tilted the playing field
by limiting foreign producers’ access to the market and by requiring
them to use many Chinese-manufactured parts.
Meanwhile, little evidence supports the widespread notion that
China is the world’s leading exporter of high-tech gadgets. Although
China does lead the world in the export of smartphones and personal
computers, it accounts for only 15 percent of those products’ value
at most. That’s because Chinese companies typically just assemble
and package semiconductors, software, cameras, and other advanced
high-tech components fabricated abroad. Consider the Tianhe-2,
for example. This supercomputer, built by the Chinese firm Inspur
in collaboration with the National University of Defense Technol-
ogy, is the fastest in the world. But it is only Chinese in a very
limited sense, since it is actually composed of thousands of U.S.-
made microprocessors.
PLAYING CATCH-UP
The dominance of Western multinationals in capital goods and
high technology rests on two pillars: open systems of innovation
that result in superior high-performance products and direct foreign
investment in operations that are global in scale but responsive to
local conditions and needs. If they ever hope to challenge the in-
dustry leaders, Chinese firms will have to develop their own versions
of those qualities. Some have taken steps in that direction, but
their lack of experience in designing advanced systems and managing
international supply chains will likely limit what they can do for
many years.
The superior commercial technology currently enjoyed by for-
eign incumbents will be one of the major obstacles China faces. In
2014, China spent $218 billion to import semiconductors, far more
than it spent on crude oil. It also paid $21 billion in royalties for the
use of foreign-owned technologies, a number that has doubled since
2008 and that rankles Beijing. (It hardly helps that the government’s
own information systems are dependent on technology made by
ibm, Oracle, emc, Qualcomm, and other non-Chinese firms, which
many Chinese officials see as a security problem.)
Last year, Beijing launched a serious drive, called “Made in China
2025,” to transform the country into an innovative and environmen-
tally responsible “world manufacturing power” within ten years. The
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A LONELY POWER
One of the keys to the United States’ economic dominance is its huge
investment in foreign markets. American corporations put $337 billion
into overseas markets in 2014, a full ten percent of what they committed
at home. All told, U.S. firms have directly invested $6.3 trillion over-
seas, which helps explain why the companies listed on the S&P 500 earn
roughly 40 percent of their profits outside the United States. Despite
slow growth at home, companies based in the United States and the
eu have increased their foreign direct investment at an average annual
rate of seven percent over the last ten years, and Japanese firms have
increased theirs at an even faster rate.
After a late start, Chinese multinationals are now following this
model. By the end of 2014, they had cumulatively invested $730 billion,
and that number is projected to nearly triple, to $2 trillion, in the next
five years—an impressive gain, although a figure that would still equal
less than one-third of current U.S. foreign direct investment. Nearly
all of China’s early overseas investments were in oil fields and mines,
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A CHINA MODEL?
Those who predict that China will dominate the future often point to
two economic concepts to bolster their case: the product life cycle,
which posits that a product originates in advanced economies but
ends up being made in lower-cost developing economies, and dis-
ruptive innovation, the process by which leading products lose their
March/April 2016 95
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D
espite boasting the most powerful economy on earth, the
United States too often reaches for the gun instead of the
purse in its foreign policy. The country has hardly outgrown
its need for military force, but over the past several decades, it has
increasingly forgotten a tradition that stretches back to the nation’s
founding: the use of economic instruments to accomplish geopolitical
objectives, a practice we term “geoeconomics.”
It wasn’t always this way. For the country’s first 200 years, U.S.
policymakers regularly employed economic means to achieve strategic
interests. But somewhere along the way, the United States began to
tell itself a different story about geoeconomics. Around the time of
the Vietnam War, and on through the later stages of the Cold War,
policymakers began to see economics as a realm with an authority and
logic all its own, no longer subjugated to state power—and best kept
protected from unseemly geopolitical incursions. International economic
policymaking emerged as the near-exclusive province of economists
and like-minded policymakers. No longer was it readily available to
foreign policy practitioners as a means of working the United States’
geopolitical will in the world.
The consequences have been profound. At the very time that
economic statecraft has become a lost art in the United States, U.S.
adversaries are embracing it. China, Russia, and other countries now
ROBERT D. BLACKWILL is Henry A. Kissinger Senior Fellow for U.S. Foreign Policy at
the Council on Foreign Relations.
JENNIFER M. HARRIS is a Senior Fellow at the Council on Foreign Relations.
They are the authors of War by Other Means: Geoeconomics and Statecraft (Harvard
University Press, 2016), from which this essay is adapted.
March/April 2016 99
Robert D. Blackwill and Jennifer M. Harris
SURVIVAL FIRST
In the years following the American Revolution, the Founding Fathers
understood that the United States could never achieve true indepen-
dence unless it became economically self-sufficient. But more than that,
these early leaders, facing predatory European nations and possessing
little ability to project power abroad, instinctively reached for economics
as their preferred—at times their only—means to protect their young
and vulnerable country. Keenly aware that European states were the
most likely source of threats, Benjamin Franklin suggested that the
United States offer its commerce in exchange for their goodwill. In
Common Sense, Thomas Paine explained how the United States could
insulate itself from Europe’s eighteenth-century power struggles by
turning to geoeconomics: “Our plan is commerce, and that, well
attended to, will secure us the peace and friendship of all Europe;
because it is the interest of all Europe to have America a free port. Her
trade will always be a protection.”
In a rare point of agreement between them, Alexander Hamilton
and Thomas Jefferson shared a basic enthusiasm for economic tools of
foreign policy. Hamilton, the father of American capitalism, stressed
the value of commerce as a weapon, a proposition that few trade policy-
makers would agree with today. Jefferson scored one of the country’s
greatest geoeconomic successes in its history when he oversaw the 1803
purchase of the Louisiana Territory from France, which doubled the
size of the United States for four cents an acre. As much as Jefferson
liked a good deal, his fundamental motivation was geopolitical. In
1801, while the territory was still under Spanish control, he confided
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his fears about its future to James Monroe, writing, “We have great
reason to fear that Spain is to cede Louisiana and the Floridas to
France.” Jefferson knew that if France acquired and held on to these
territories, it would be emboldened to expand its holdings, setting the
United States up for a military confrontation that it almost certainly
could not win.
During the Civil War, the North persuaded the United Kingdom
to stop supporting the South in part through economic intimidation:
it threatened to confiscate British investments in U.S. securities and to
cease all trade, including grain shipments. Later, as the task turned from
war fighting to reconstruction, U.S. leaders pursued geoeconomic
openings that would not merely restore their newly unified country
but also strengthen it beyond its prewar position. Secretary of State
William Seward negotiated the purchase of Alaska from Russia in
1867, increasing the country’s size by nearly 600,000 square miles.
Despite a bargain price of two cents an acre, the deal was derided in
Congress and the press. History would vindicate the purchase Seward
M PI / G ET TY IMAG ES
TOTAL WAR
World War I profoundly shifted the United States’ relationship with
geoeconomics. At the beginning, the United States clung to its pol-
icy of neutrality in trade. But once Washington entered the war, in 1917,
it enacted draconian economic embargoes. Within months, the United
States pivoted to full cooperation with the Allies’ food blockade of
Germany and then embargoed all exports to the Scandinavian countries
and the Netherlands, all of which had stayed neutral.
The United States’ early geoeconomic pursuits were not without
controversy, but disagreements turned mainly on how, not whether, to
use economic influence. President Woodrow Wilson entered office deeply
opposed to “dollar diplomacy,” his predecessors’ policy of encouraging
overseas investment to further U.S. interests. Yet Wilson took issue
with the ends, not the means. He said he remained “willing to get
anything for an American that money and enterprise can obtain, except
the suppression of the rights of other men.” Sure enough, by 1919, as
the country’s main object in Europe shifted from winning the war to
securing the peace, Wilson advanced a largely geoeconomic solution.
He persuaded the new League of Nations that its best hope of pre-
venting another war was an “absolute” boycott on aggressor countries.
“Apply this economic, peaceful, silent, deadly remedy and there will
be no need for force,” Wilson urged.
Even as isolationist sentiment swelled in the United States after
World War I, the country was still honing its geoeconomic reflexes
around the world. As the United States grew tired of Europe’s military
dilemmas, it turned to facilitating private investment overseas in an
effort to expand U.S. influence. In 1924, for instance, it spearheaded
the Dawes Plan, which allowed U.S. banks to lend Germany enough
money to pay war reparations to France and the United Kingdom.
After President Franklin Roosevelt took office in 1933, his administra-
tion embraced geoeconomics to preempt German encroachment in the
Western Hemisphere. Between 1934 and 1945, the United States signed
29 reciprocal trade agreements with various Latin American countries.
And in Asia, the administration tried to use the Export-Import Bank
to blunt the rise of Japan. Citing a “bare chance we may still keep a
democratic form of government in the Pacific,” Treasury Secretary
Henry Morgenthau, Jr., arranged a $25 million loan to China in 1938.
Then World War II broke out, and Washington’s geoeconomic
policies went into overdrive. In 1941, Congress passed the Lend-Lease
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Act, under which the United States supplied Allied nations with some
$50 billion worth of military supplies (equivalent to about $660 billion
worth today). If the lend-lease policy was, in the words of Secretary
of War Henry Stimson, “a declaration of economic war,” many British
felt that it was directed as much at London as Berlin. Their complaints
were not entirely unfounded: under lend-lease, Washington meddled
in British economic affairs to a degree that is almost unimaginable
today, managing British exports, seeking unilateral control over levels
of British gold and dollar reserves, and extracting British concessions
concerning the terms of the postwar order.
In 1943, the U.S. government even established the Office of
Economic Warfare, an agency charged with safeguarding the U.S.
dollar. Its more than 200 market analysts around the world and nearly
3,000 experts in Washington did so by helping U.S. producers increase
exports and securing vital imports at favorable terms. A year later,
delegates from the Allied countries signed the Bretton Woods agree-
ment. The goal was not trade for trade’s sake but, as Secretary of State
Cordell Hull explained, “a freer flow of trade . . . so that the living
standards of all countries might rise, thereby eliminating the economic
dissatisfaction that breeds war” and imparting “a reasonable chance of
lasting peace.” That goal, of course, would go on to usher in a lasting
peace on the United States’ terms.
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But for the most part, the administration reached first for political
and military tools as it sought to assert U.S. leadership throughout
the world. It was also during this period that U.S. and European gov-
ernments did very little economically to shape the direction of Russia
under Boris Yeltsin—a profound omission that, since it enabled the
rise of Vladimir Putin’s neoimperialism, haunts the world today.
Then came 9/11, which arguably made the shift to an even more
militarized national security strategy inevitable. Although the George
W. Bush administration tried to curtail terrorist financing, al Qaeda
and its affiliates were hardly vulnerable to economic coercion; the war
on terrorism would have to be fought by ground forces, combat aircraft,
and armed drones.
WHAT CHANGED?
Given how adept at economic statecraft the United States once was,
why have policymakers largely forgotten the practice? Part of the
answer lies in the Cold War’s military dimension, which must have
weighed heavily on the minds of decision-makers who faced crisis
after crisis. Material factors were important, too: the onset of eco-
nomic insecurity in the United States in the 1970s and the rise of the
multinational corporation (and, with it, an organized political lobby
for trade). Institutional factors played a role, as well. From the 1980s
onward, bureaucratic momentum shifted from the State Department
to the Pentagon, and the trade office that Kennedy had established in
the White House ballooned into the much larger and more powerful
Office of the U.S. Trade Representative.
But the main reason the United States abandoned geoeconomics
may have less to do with evolving foreign policy habits than with
evolving economic beliefs—in particular, economists’ growing reluc-
tance to see themselves and their discipline as embedded in larger
realities of state power. The standard-bearers of economic thought
during the nineteenth and early twentieth centuries had little problem
using economics as an instrument of state power, whereas their neo-
classical successors thought that markets were best kept free from
geopolitical interference. Their worldview happened to fit the Cold
War well: with the Soviet Union opposed to free trade, a gain for free
trade anywhere was a gain for the West.
The neoclassical economic orthodoxy survived the Cold War, as did
the resulting divide between economists and foreign policy thinkers.
For two decades, none of this mattered, since the United States faced
no serious strategic challenge and thus had no reason to revisit whether
neoclassical ideas still aligned with the country’s foreign policy goals.
Today, however, tensions between neoclassical economics and U.S.
foreign policy have arisen. Many states now appear entirely comfort-
able employing economic tools to advance their power, often at the
expense of Washington’s. China, for instance, curtails the import of
Japanese cars to signal its disapproval of Japan’s security policies. It
lets Philippine bananas rot on China’s wharfs to protest Manila’s stance
on territorial disputes in the South China Sea. It rewards Taiwanese
companies that march to Beijing’s cadence, and punishes those that do
not. Russia, meanwhile, bans imports of Moldovan wine as Moldova
weighs deeper cooperation with the eu, and Moscow periodically
reduces energy supplies to its neighbors during political disagree-
ments. It dangles the prospect of an economic bailout to Cyprus in
return for access to its ports and airfields, forcing eu leaders to choose
between coming through with a sufficiently attractive bailout of their
own and living with a Russian military presence inside the eu.
Such moves can sit uncomfortably with the tenets of neoclassical
economics, which has difficulty accounting for the geopolitical aims of
adversaries’ economic policies. For U.S. policymakers, recognizing
the geopolitical motivations behind such economic power plays need
not necessarily mean responding in kind. Still, they should recall the
advice of John Maynard Keynes and other economists who saw them-
selves as guided by the prevailing realities of state power—and who
saw a danger in illusions to the contrary.
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Return to Table of Contents
I
n the Internet age, the world feels far smaller than it used to. But
many Americans still know little about the rest of the world and
may be more detached from it than ever. Such a lack of awareness
is, in certain respects, understandable. Once the Cold War ended,
some 25 years ago, Congress, perhaps out of a false sense of security,
cut the foreign affairs budget, which led to the closing of some U.S.
overseas posts. The news media, especially the commercial television
networks, took their cue and began to reduce overseas coverage—
responding, they said, to the decline of public interest in such matters,
which conveniently coincided with their own economic woes. Although
the 9/11 attacks and the subsequent wars in Afghanistan and Iraq
stimulated renewed attention to international events, that phenomenon
proved short-lived. Consequently, as new global challenges have arisen
in recent years, American discourse on world affairs has lacked historical
context or deeper understanding. It has become difficult to stir thought-
ful, informed debate on foreign policy issues during congressional—
or even presidential—campaigns. Many politicians who aspire to lead
the country seem not to understand what constitutes a foreign policy
issue, let alone the complexity of dealing with one. A candidate who
speaks a foreign language appears almost suspect.
One symptom of Americans’ new isolation is a sharp contrast
between the positive, even zealous views they hold of the United States
and its role in the world and the anti-Americanism and negative
perceptions of U.S. foreign policy that flourish almost everywhere
else. This gap persists in part because relatively few Americans look
beyond, or step outside, their own borders for a reality check. Less
than 40 percent of Americans hold passports. Compare that figure
with the numbers from other English-speaking countries that are
geographically isolated: 50 percent of Australian citizens hold pass-
ports, as do more than 60 percent of Canadians and 75 percent of
New Zealanders. In the United Kingdom, which is admittedly
much closer to foreign destinations, some 80 percent of citizens
carry passports.
Given the United States’ determination to project its hard and soft
power and preserve its influence in a restless but interconnected
world, the almost universal failure of the broader U.S. public to know
and understand others, except through a military lens, is not just
unfortunate but also dangerous. It severely hinders the creation and
implementation of a rational, consistent, and nuanced foreign policy
that reflects American values and enjoys public support.
Luckily, there exists a disarmingly simple way to help address this
problem and to produce future generations of Americans who will
know more and care more about the rest of the world: massively in-
crease the number of U.S. college and university students who go
abroad for some part of their education and bring home essential
knowledge and new perspectives. The federal government should pass
ambitious legislation, akin in scope and impact to the transformative
National Defense Education Act (ndea) of 1958, that would directly
fund more study-abroad opportunities and create incentives for colleges
and universities to put them in place and for students to pursue them.
Such action would help democratize study abroad by making it more
affordable and accessible, spreading its benefits beyond the relatively
narrow cohort of mostly white and well-off students at a relatively
small number of institutions who tend to take advantage of it today.
To realize the tremendous potential of study abroad to improve
American society and U.S. foreign policy, many more Americans—
and more kinds of Americans—need to take part.
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from: the ways that other societies organized urban housing and trans-
portation for the poor, conducted immunization and literacy campaigns,
made cultural events accessible to a broad audience, and—one of the
most frequently mentioned—honored and cared for older generations.
It became clear that if Goucher could dramatically and quickly
increase participation in study abroad, the college would become a dif-
ferent, indeed distinctive, place—a great advantage in the competitive
liberal arts college market. Within a few years, after some gut-wrenching
internal deliberations, Goucher made study abroad mandatory for
undergraduates, provided a stipend to make it more affordable for all,
and turned its little corner of the world alongside the Baltimore Belt-
way into a laboratory for international exploration. Enrollments grew,
horizons broadened, and opportunities beckoned. In every possible
venue, including in the residence halls and over meals, returning
students regaled one another, and those yet to go, with stories of
where they had been and what they had learned. Instructors soon
accommodated these new perspectives, and the campus became a more
welcoming environment for international students, who often found
people at Goucher already aware of their countries and cultures.
INFREQUENT FLIERS
The trouble is that relatively few Americans currently enjoy this kind
of life-changing overseas experience. According to the most reliable
estimates, some 304,000 U.S. students studied abroad for credit during
the 2013–14 academic year, which represented about 1.5 percent of all
American students enrolled in institutions of higher education that
year. The number of Americans studying abroad seems especially low
compared with the flow in the other direction. International students,
for whom the United States has become the top destination of choice,
now make up almost five percent of the total enrollment in U.S. higher
education, split roughly evenly between undergraduate and graduate
programs. According to the Institute of International Education (iie),
the foreign population in U.S. colleges and universities increased by ten
percent in the 2014–15 academic year, to a record high of nearly 975,000
students, over 30 percent of whom were from China. Put simply, that
means that there are more than three times as many foreigners studying
at U.S. colleges and universities as there are Americans studying abroad
altogether, and about the same number of Chinese students matriculate
in the United States as do Americans anywhere in the world.
114 f o r e i g n a f fa i r s
A number of significant obstacles have long stood in the way of
more Americans heading overseas during college. First, students at
institutions with a core curriculum may find it difficult to complete all
their requirements on schedule if they go away for a substantial period
of time, and few of those colleges and universities have been inclined
to offer core courses or approve their equivalents overseas. Some
advisers to premedical students counsel against education abroad, on
the theory that it could somehow make those students less competitive
for admission to the top U.S. medical schools. Other tightly structured
courses of study, such as teacher-training programs, may also discourage
students from straying down international paths.
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than other citizens, and studying and traveling overseas no doubt affirms
those attitudes. But if study abroad were to become a more wide-
spread, mainstream experience, it would have far more profound
effects on American society. One of the most basic promises and pur-
poses of U.S. higher education is to broaden elite circles and make
it possible for anyone to aspire to any position, regardless of his or
her background or ethnicity. Expanding participation in study abroad
will be an important part of realizing that ideal.
As it stands, however, many first-generation college students and
children of immigrants likely see study abroad as a luxury or a rite of
passage intended mostly for those from wealthy white families, and
they may consider it more a form of tourism than a serious academic
endeavor. That stereotype is often reinforced in the news media
and in literature and films. But at Goucher, we found that as study-
abroad participation expanded quickly, students from inner-city,
rural, or multicultural backgrounds were among the greatest enthusi-
asts, often adapting far more readily to new environments than their
peers from upper-middle-class suburban families, who might never
even have shared a bathroom as they were growing up. Coincidentally,
studying overseas together sometimes improved relations among
members of different ethnic, social, and religious groups on campus
when they returned.
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who study abroad; the variety of institutions sending them; and the
geographic range of their destinations.
Senator Dick Durbin, the Democrat from Illinois who succeeded
Simon, now champions Simon’s cause. In 2005, with the support of
President George W. Bush, Durbin introduced a bill creating the
nonpartisan Commission on the Abraham Lincoln Study Abroad
Fellowship Program, with the long-term goal of building an interna-
tionally educated citizenry. The commission’s report, issued later that
year, urged the establishment of what Johnson, of nafsa, called “a
bold, visionary study abroad program
that will serve our national interests.”
Although the commission recommended
If overseas education
a relatively small federal investment in remains overwhelmingly a
need-based study-abroad scholarships, pursuit of the white elite, it
it issued a clarion call: “Our national cannot realize its potential.
security and domestic prosperity depend
upon a citizenry that understands Amer-
ica’s place in the world, the security challenges it faces, and the opportu-
nities and perils confronting Americans around the world. Responding
to these realities requires a massive increase in the global literacy of
the typical college graduate.”
More than ten years later, the goals of the Lincoln Commission
remain unfulfilled, but new, narrower ones have emerged. In 2010,
Secretary of State Hillary Clinton established the “100,000 Strong”
initiative to increase to that level the number of U.S. students in
China. The Chinese government, supportive of the effort and recog-
nizing that a vast number of Chinese students receive financial aid in
the United States, pitched in with 10,000 scholarships for Americans
who study in China. The goal of increasing the number of U.S.
students in China has proved elusive, however. In fact, the number
has been slowly declining: in the 2013–14 academic year, there were
fewer than 14,000 Americans studying there.
In 2011, U.S. President Barack Obama launched a drive to increase
the number of Americans studying in Latin America (then about
40,000) and the number of Latin Americans studying in the United
States (then about 60,000) to 100,000 annually in each direction.
Progress toward that goal has also been slow, but in the 2013–14
academic year, there was an 8.4 percent increase in the number of
U.S. students in Latin America compared with the prior year. First
MAKE IT HAPPEN
So far, efforts to increase the number of Americans studying abroad
have been piecemeal and only partially successful. The time has come
to establish a clear and forthright U.S. national education policy that
recognizes the importance of international literacy and global aware-
ness for the future of the United States. This will be essential in the
years ahead to ensure U.S. competence and competitiveness in a
rapidly evolving world. It will not be easy to eliminate from U.S.
political discourse the routine invocations of American superiority
and invulnerability, complete with divine blessings, which no longer
have credibility beyond U.S. borders. But at a minimum, it must
become acceptable for presidents and other politicians to acknowl-
edge openly that Americans may find ideas and inspiration abroad.
The United States will need many more civil servants, congressional
staff members, leaders of business and science, and journalists with
international exposure. This is a long-term process that has nothing to
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some state and local governments, should provide those who have
studied abroad with an affirmative hiring preference for jobs that deal
with international matters, much like the advantages that benefit
military veterans. Meanwhile, the faculties of U.S. colleges and uni-
versities also need to improve their international awareness. The U.S.
Departments of State and Education, working together, should estab-
lish a program of competitive grants to provide for and reward inter-
national experiences for faculty members in all academic fields and
for certain staff members, as well. (Nafsa is already conducting
“global learning colloquia” for faculty, which focus on strategies to help
students develop the knowledge and skills they need to engage with
the wider world.)
The recent paralysis in Congress and the vigorous antipathy of
conservatives toward any proposals for increased government
spending might lead seasoned observers to be skeptical of the pros-
pects for a comprehensive national policy supporting study abroad
and greater international awareness. But both political parties include
an internationalist wing, and a focus on the importance of this issue
to national security could bring them together to support a significant
bipartisan effort.
To defeat violent extremism and surmount other formidable
political and economic challenges in the international arena, Ameri-
cans will have to stop preening and begin trying to understand how
the world looks through others’ eyes—and how determinedly the
rest of the world resists U.S. supervision and dominance. The only
prospect for beginning that transformation lies in broadening the
basic definition of an excellent higher education to include direct
exposure to other cultures and their ways of dealing with shared
problems. As successive generations emerge with this perspective,
their impact will grow; change will become inevitable. The interna-
tional scene will still be full of tyrants petty and grand, and the need
to defend the United States and help others defend themselves will
hardly disappear overnight. But the United States would be able to
function far more effectively if its people and its leaders felt more
comfortable in the world.∂
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L
ast September, tens of thousands of opponents of Japanese
Prime Minister Shinzo Abe gathered outside the National
Diet building in Tokyo, often in torrential rain, holding placards
and shouting antiwar slogans. They were there to protest the imminent
passage of legislation designed to allow Japan’s military to mobilize
overseas for the first time in 70 years—a shift they feared would
undermine Japan’s pacifistic constitution and encourage adventurism.
On September 17, Japan’s normally sedate parliament dissolved into
scuffles as opposition politicians tried and failed to prevent a vote on
the bills, which ultimately passed.
They and the protesters may have failed in their objective, but
they got something right: Japan’s foreign policy is indeed chang-
ing. Since returning to power in September 2012, Abe has pushed
through a series of institutional, legal, diplomatic, and military
reforms that are reshaping Japan’s national security posture and
that promise to enhance Japan’s regional role over the coming decade.
Responding to rapid changes in the region, particularly the dramatic
increase in China’s power, Japan’s prime minister has distanced
his country from its postwar pacifism—which was predicated on a
benign view of the international system—and unveiled a new, more
realist foreign policy.
Japan’s pacifism, which many Japanese see as key to their country’s
postwar identity, dates to 1946. That year, the country, still occupied
by the United States, accepted a U.S.-drafted constitution forbidding
Japan from maintaining a military with the potential to wage war. When
the U.S. occupation ended, in 1952, Tokyo essentially outsourced its
MICHAEL AUSLIN is a Resident Scholar and Director of Japan Studies at the American
Enterprise Institute. He is the author of a forthcoming book on geopolitical risk in Asia.
Follow him on Twitter @michaelauslin.
126 f o r e i g n a f fa i r s
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Seeing red: Shinzo Abe at the Defense Ministry in Tokyo, December 2015
In August 1990, less than a year after the fall of the Berlin Wall,
Iraq’s Saddam Hussein invaded Kuwait. Washington assembled a
huge military coalition to oust him, but Tokyo refused to send troops,
paying $13 billion instead to help defray the costs. The move failed
to win Japan much credit, however. Critics in the United States and
elsewhere widely derided it, and the episode, which raised new ques-
tions about Japan’s ability to translate its economic might into strategic
clout, tarnished the country’s image as a leading global power.
Then, in 1998, North Korea launched a ballistic missile over the
island of Honshu. This was Tokyo’s “Sputnik moment”: raising Japan’s
sense of insecurity and fears that its key ally might not be able to protect
it from new threats. And Japan suddenly realized that it was facing
what could become an existential threat from a rogue regime known
to be pursuing nuclear weapons.
A final, ongoing reason for Japan’s strategic evolution has been the
steady rise of China as a political, economic, and military power.
Long accustomed to being the major player in Asia, Tokyo has recently
I S S E I K AT O / R E U T E R S
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Japan’s New Realism
States and taking a harsh tone toward China, which he identified (along
with North Korea) as Japan’s main strategic threat. Noda agreed to
purchase the F-35 stealth fighter jet and eased a 1960s-era de facto ban
on exporting weapons. Noda also joined negotiations over the Trans-
Pacific Partnership, supporting Washington in its attempt to establish
a free-trade bloc of largely liberal nations that excluded Beijing.
Perhaps most significant, Noda nationalized three islands in the
Senkaku chain (known as the Diaoyu chain in China) also claimed by
China and Taiwan. Since the return of Okinawa to Japanese control in
1972, Japan had administered these privately owned islands, but in
September 2012, to prevent their purchase by the right-wing gover-
nor of Tokyo, Noda had the Japanese government buy them instead.
Although Noda’s move was meant to block an even sharper provoca-
tion, it dramatically worsened Japan’s relationship with China.
Beijing responded by sending private fishing boats and maritime
patrol vessels into the waters around the islands on a regular basis,
and Noda began warning that China sought to undermine Japan’s
administrative control of the Senkakus as a first step toward chal-
lenging its territorial claim. Beijing’s actions raised alarms in Japan
about China’s growing military strength, its presence in the East
China Sea, and the threat China posed to Japan’s southwestern island
chain (which stretches from the southernmost island of Kyushu to
just off Taiwan). The defense of these islands and the seas around
them thus became the focus of Japan’s new strategic vision, which it
would be under Abe as well, when he returned as prime minister in
December 2012.
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In April 2015, Tokyo and Washington upgraded their ties for the first
time since 1997, announcing that they would start cooperating more
closely on maritime security and regional stability. The two nations
also agreed to work together to deal with ambiguous security situa-
tions that fall short of formal conflict and to jointly respond to threats
in space and cyberthreats.
REMAKING ASIA
By slowly eliminating its restraints on security cooperation, by deep-
ening its relationship with the United States, and by emphasizing
more muscular, liberal rhetoric, Abe’s Japan has positioned itself as a
sort of anti-China in Asia and beyond. Yet many of the other restrictions
on Japan’s military remain in place, and these will not be revoked
anytime soon. Japan’s society would not allow its military to play a
more normal role in dealing with foreign crises; the Japanese also
remain highly wary of entangling alliances.
Yet many of Japan’s elites—who are worried about the threats
from China and North Korea and who fear that the United States is
distracted by crises in the Middle East and Ukraine—have embraced
the country’s new realism. Leading thinkers, including the journalist
Yoichi Funabashi, the former diplomat Kuni Miyake, the political
scientist Koji Murata, and the former defense minister Satoshi
Morimoto, are among those writing and speaking about the need for
a more muscular Japanese posture. Indeed, there is a growing com-
munity of academics, policy analysts, and politicians who believe
that Japan must do more to ensure its own security, as well as to help
support the global system that has protected it since the end of
World War II.
As Abe expands Japan’s global role, his policies will include new
activities abroad and entail deeper security cooperation with existing
partners. The more unstable the global environment becomes, the more
Japan will need to play a global role commensurate with its size and
economic strength. That role should take advantage of multilateral
organizations, but it will, realistically, privilege Japan’s security.
After decades of stagnation in Japan’s foreign and security policies,
the new posture will contribute to the maintenance of Asia’s liberal
post–World War II order over the coming decade and beyond.
Abe’s policies, which build on some of those of his predecessors,
are a series of small yet interlinked steps that will enhance Japan’s
134 f o r e i g n a f fa i r s
Return to Table of Contents
A
fter dithering for decades, governments finally seem to be pay-
ing serious attention to the problem of global climate change.
Late last year, at the Paris climate conference, they adopted a
major new agreement to limit global warming, beginning a process to
strengthen commitments to reduce greenhouse gas emissions over time.
For many observers, the promises of the Paris conference offer too little,
too late, because emissions are high and still rising and because there will
be major disruptions to the climate even if countries meet their emissions-
reduction pledges. Nevertheless, it had been 18 years since the world’s
governments left a major climate summit with an agreement in hand, so
just getting to yes in Paris has offered climate diplomacy fresh credibility.
Until now, governments have focused on limiting the greenhouse
gases that cause global warming and its attendant hazards, such as rising
sea levels and stronger storms. But there is more to climate change than
higher temperatures. Many of the activities that cause greenhouse gas
emissions—burning coal for power, diesel for transport, and wood for
cooking, for example—also yield ultra-small particles known as aerosols,
which blanket vast areas in a haze that blocks and scatters sunlight. By
reducing the solar energy that reaches the earth’s surface, aerosols
reduce evaporation and slow the water cycle that governs where, when,
and how much rain falls.
For years, climate scientists have believed that a warmer world would
be wetter, because higher temperatures hasten evaporation and increase
rainfall. But even when these higher temperatures are accounted for, a
world dimmed by aerosols will in fact be drier in many places—including
some areas, such as the Sahel and other regions in sub-Saharan Africa,
that have long suffered from drought because they rely on rainfall to
sustain subsistence agriculture. According to many of the most reliable
models, such as those produced by the National Center for Atmospheric
Research and Princeton University’s Geophysical Fluid Dynamics
Laboratory, China, North America, and South Asia are also in danger
of more frequent and severe droughts owing to aerosols. Indeed, for
much of the world, aerosol-induced dimming and drying are among the
most immediate dangers posed by pollution.
The good news is that swift action on aerosols is possible, with huge
potential benefits. Many of the tools needed to make rapid cuts to aero-
sol emissions are already available, and policymakers around the world—
notably in Europe and the United States, and also in East Asia—have
shown how to use them. Since aerosols have a short atmospheric life
span, the climatic benefits of emissions cuts would appear quickly, within
only a couple of decades. What is more, speedy action on aerosols would
bring huge global health benefits: roughly seven million people die each
year from causes related to particulate pollution, and cutting down on
aerosols would dramatically reduce the death toll. In light of these
potential benefits, governments around the world should ensure that
aerosols play a central role in their environmental policies by encouraging
the development and deployment of cleaner technologies for power gen-
eration, transportation, and household cooking, heating, and lighting.
Measures to limit aerosol pollution tend to receive less public attention
than the broader campaign against greenhouse gases, but they, too, should
be an essential component of global action against climate change.
136 f o r e i g n a f fa i r s
The Next Front on Climate Change
Throwing shade: a farmer burns paddy husks in Chandigarh, India, October 2003
of black carbon, absorb sunlight and accelerate warming. But lighter
aerosols, such as the sulfates and nitrates formed from coal, gasoline,
and other fuel emissions, cool the planet by reflecting sunlight back
into space. That explains, in part, why the world hasn’t seen more of a
temperature increase from the greenhouse gases already present in
the atmosphere. (This masking effect is powerful enough that some
advocates of geoengineering have proposed injecting more reflective
aerosol particles into the atmosphere in order to cool the earth.)
Focusing on how aerosols affect temperature, however, has distracted
policymakers from the important and distinct effects that aerosols
have on the water cycle. These effects are most pronounced in the
Northern Hemisphere, which is the source of most of the world’s
aerosols and thus suffers the most dimming from these pollutants.
But because air currents tend to carry pollution, water droplets, and
water vapor far from their origins, aerosols produced in one region
can also affect rainfall far afield.
REUTE RS / KAMAL KISHO RE
Since the 1880s, when reliable record keeping began, global tempera-
tures have increased by about 0.9 degrees Celsius. And as the planet
has warmed, rainfall at latitudes above 45 degrees has generally
increased. But twice since the mid-twentieth century, surges in aerosol
emissions have significantly disrupted this pattern, reducing rainfall
in a number of regions.
The first disruption was the result of the sulfur dioxide emissions
produced by the massive combustion of coal and other fuels across
Europe and North America in the mid-twentieth century, driven by
rapid industrial growth after World War II. From the 1950s to the late
1980s, global emissions of sulfur dioxide
In 2010, China and India (which in the atmosphere becomes
sulfate, a reflective aerosol) nearly dou-
received between ten and bled, reducing the amount of sunlight
15 percent less sunlight than reaching the earth’s surface by about
they did in 1970. two percent, on average. As a direct
result of this dimming, average rainfall
in the Northern Hemisphere declined by
between three and four percent over the same period. Indeed, there is
strong evidence that sulfur dioxide emissions in the United States and
western Europe contributed to the Sahelian megadroughts that began
in the 1960s and continued through the 1990s, a period during which
precipitation in the Sahel and some other parts of sub-Saharan Africa
fell by between 25 and 50 percent relative to twentieth-century averages.
Thanks to stringent air pollution laws introduced in the 1970s and
strengthened steadily in the following years, the blanket of aerosols
over Europe and North America has thinned since the 1980s. From 1980
to 2000, the average amount of sunlight that reached the earth’s surface
in these regions increased by about four percent—enough to lift average
annual precipitation on land areas in the Northern Hemisphere by a
similar magnitude.
A second surge in aerosols is now playing out in East Asia and
South Asia. These regions, which have rapidly industrialized over the
past four decades, have seen a two- to fourfold increase in sulfur dioxide
and black carbon emissions since the 1970s. As a result, in 2010, China
and India received somewhere between ten and 15 percent less sunlight
than they did in 1970. As the wind has carried sulfates and black carbon
over thousands of miles, the dimming effect has extended to the atmos
phere over the Indian Ocean, reducing the evaporation of seawater and
thus weakening the monsoons that bring much-needed water to East
Asia and South Asia every year. From 1950 to 2002, the most recent pe-
riod for which estimates are available, there was a seven percent decrease
in average annual rainfall over the Indo-Gangetic Plain, the fertile belt
of land crossing eastern Pakistan, northern India, and Bangladesh that
is home to more than one billion people, many of them dependent on
138 f o r e i g n a f fa i r s
The Next Front on Climate Change
140 f o r e i g n a f fa i r s
The Next Front on Climate Change
ACT FAST
As governments build on what they achieved at the Paris climate confer-
ence, they must set politically feasible targets for future action. Focusing
on aerosols could help. Whereas greenhouse gas emissions will bring
about relatively distant and diffuse dangers, aerosols cause immediate
and localized harm. That should raise the incentives for governments to
act against them, and it should raise the willingness of their constituen-
cies to accept such action. Indeed, in the case of aerosol reductions, the
142 f o r e i g n a f fa i r s
REVIEWS & RESPONSES
There is plenty to learn from
the Romans—if we have
the courage to entertain the
possibility.
—Michael Fontaine
A
ncient Rome was a village that of the classical period. What makes Beard’s
grew into a world empire. At effort so compelling nonetheless is the
the peak of its territorial reach, contemporary, politically charged idiom
ad 117, it stretched from the British Isles in which the Cambridge don recasts an
to Mesopotamia and from the Rhine to old story. SPQR is a translation of Roman
the Sahara. Its history spans more than history into the English of today—into
a millennium. Before the Western Roman the phrases and patterns of thought that
Empire collapsed in the late fifth century, we absorb from mass media and that
Romans enjoyed a standard of living bring order and meaning to our lives—
not seen again in the West until the and Beard’s genius is in using this idiom
mid-nineteenth century. They had flush alone, rather than outright comparison,
toilets, granite countertops, indoor to suggest ancient parallels with the
heating, and even cosmetic dentistry. politics and controversies of the twenty-
The government that safeguarded this first century. Her book thus offers insights
way of life styled itself Senatus Populusque into not only Rome’s history but also
Romanus, or “the Senate and the People the challenges of the present.
of Rome.” An advertisement for the link
between Rome’s citizens and its elected ROMANS—THEY’RE JUST LIKE US!
leaders, the abbreviation “spqr” was Take Beard’s treatment of Romulus,
proudly displayed everywhere. Rome’s legendary first king. When his
Rome’s classical era spanned the last mother, a virgin priestess, first became
two centuries bc and the first two centu- pregnant, she accused Mars, the Roman
ries ad. At the beginning of that period, god of war, of raping her. When Romulus
and his twin brother, Remus, were born,
MICHAEL FONTAINE is Associate Professor
of Classics at Cornell University. Follow him on their great-uncle, who had seized the
Twitter @M_S_Fontaine. throne from the boys’ grandfather and
144 f o r e i g n a f fa i r s
What Rome Can Teach Us Today
feared that they would grow up to or—as we have seen in recent history—
threaten his hold on power, sent gov- anarchy can result.” Beard does not
ernment agents to kidnap them and need to explicitly mention Iraq or
then abandon them in a reed basket in Libya to make her point.
the Tiber River. But the government Nor does she need to reference
men botched their job: rather than today’s U.S. Congress to make readers
dying, the twins were soon discovered appreciate the subservience of a Roman
by a she-wolf, who suckled them back to senator who, when asked to vote on a
health. According to legend, Romulus matter in an open ballot by the emperor
went on to found Rome, establish its Tiberius, responded, “Could you tell
government, and, on his death, ascend me in what order you will cast your
into heaven. vote, Caesar? If you go first I shall have
Beard’s retelling does more than just something to follow. If you go last of
conjure up the obvious biblical parallels all, I fear I might find myself inadver-
with the Virgin Birth, Moses’ reed tently on the wrong side.” The anecdote
basket, and the Ascension. It evokes con- can’t help but make one think of the
temporary concerns, such as conten- servility of some members of the U.S.
tious accusations of rape (Beard uses Congress to powerful special interests
that term rather than the euphemisms, such as the National Rifle Association.
such as “abduction” or “seduction,” In similar ways, Beard’s discussion of
preferred by some historians of Rome) the debate over 4,000 “stateless” sons of
and the incompetence of government Roman soldiers and Spanish women in
officials. By describing the layers of 171 bc conjures up the rancor surround-
telling and retelling in Roman sources ing so-called anchor babies today, and
that obscure the details of the Romulus contemporary arguments about undocu-
story, Beard adopts a detachment from mented immigration lurk just beneath
her subject that invites readers to share the surface of her discussion of a speech
her skepticism. And when she points that Marcus Tullius Cicero gave in 62 bc
out that even many Romans disbelieved to defend the right of Archias, an ethnic
their city’s founding myths, she makes Greek, to Roman citizenship. We even
us wonder whether we today are any hear echoes of the frequent denuncia-
savvier than the men and women who tion of so-called political correctness
lived two millennia ago. by today’s conservatives in comments
Or consider the emperor Augustus’ made by Cato the Younger the year
clever use of institutional reforms toward before Cicero’s speech, in 63 bc. “Long
the end of the first century bc to disem- ago we lost the real names of things,”
power potential rivals in the military Cato warned. “Giving away other people’s
and the Senate. Beard’s telling evokes money is called ‘generosity.’ Flagrant
the dangerous consequences of U.S. misbehavior is called ‘courage.’ We’ve
military interventions in the Middle reached the tipping point and it’s killing
East. “As is often the case in regime our country.”
change,” she writes, “the new guard is Not all of SPQR’s contemporary
more or less forced to rely on a care- resonances relate to U.S. politics.
fully reformed version of the old guard, Beard sees Rome’s early kings as
146 f o r e i g n a f fa i r s
immediately; that was the best
way for Rome to project strength
and persuade the other conspir-
ators to give up and go home.
The problem with Cato’s idea,
however, was that it was illegal.
If his argument nonetheless
sounds familiar, that’s because it
is. Days before the first anniver-
sary of 9/11, Condoleezza Rice,
then the national security adviser
to U.S. President George W.
Bush, appeared on television to
sell the idea of invading Saddam
Hussein’s Iraq. “The problem
here,” she mused on cnn, “is
that there will always be some
uncertainty about how quickly
[Saddam] can acquire nuclear
weapons. But we don’t want the
smoking gun to be a mushroom
cloud.” Just like Cato’s, her
implication was clear: speedy
preemptive action was the only
way to prevent an irreparable
catastrophe.
Caesar, then a senator,
answered Cato’s proposal with
an objection that should be
equally familiar. “Many mortals
is what Rome’s greatest historian, Sallust, remember only what comes last,
later made the centerpiece of his account and in the case of heinous individuals,
of the episode. “In the case of other they forget their crime and talk only of
offences,” thundered Cato the Younger, the punishment they have received, if it
in the same speech in which he denounced was a little too severe,” he said—lines
his contemporaries’ tendency toward that echo the argument against torture
euphemism, “you can proceed against made by U.S. Senator John McCain in
them after they have been committed; 2005. “Prisoner abuses . . . inevitably
with this, unless you make sure it doesn’t become public,” McCain wrote, “and
happen, there’s no point appealing to when they do they threaten our moral
the laws after it’s happened. Once a city standing, and expose us to false but
has been taken, nothing is left to the widely disseminated charges that democ-
vanquished.” The thing to do, Cato racies are no more inherently idealistic
suggested, was to execute the plotters and moral than other regimes.”
148 f o r e i g n a f fa i r s
What Rome Can Teach Us Today
111, for instance, Pliny the Younger, gers. And the emperor Theodosius’
then the governor of Bithynia, a Roman decree of ad 380, which required all
province in northwestern Anatolia, Roman subjects to believe in the
encountered the adherents of a strange Christian Trinity and led inevitably to
and relatively new religion called the persecution of religious dissidents,
Christianity, then still illegal under should remind us to be wary of politi-
Roman law. Pliny felt bound to subject cians who seek to prohibit the expres-
the Christians to loyalty trials, and he sion of an unpopular belief or mandate
wrote a letter to the emperor Trajan the acceptance of a popular one.
asking whether the ad hoc procedures There is in fact plenty to learn from
he had adopted, among them making the Romans—if we have the courage to
use of an anonymously provided list entertain the possibility. Viewed in this
of alleged local Christians, were accept- light, SPQR is a broad introduction to
able. The emperor’s reply was remark- the best thousand years of Roman history
able. The Christians “must not be hunted that proves why, as Beard writes on its
out,” he wrote. “If they are brought before first page, “Rome is important”—and
your court and the case against them is reminds us why it is particularly
proved, they must be punished. . . . important now.∂
But anonymous lists must not have any
place in the court proceedings. That
would set a terrible precedent. It’s
un-Roman.” Despite Rome’s official
intolerance of Christianity, Trajan’s
lesson is worth remembering: strong
state values can be invoked to avoid
setting particularly disastrous prec-
edents in the treatment of marginalized
minority groups. Nor is this the only
lesson that Roman history offers the
present. Rome’s difficult campaign
against the North African kingdom
of Numidia in the second century bc
illustrates that protracted wars against
distant, poorly understood enemies often
bring military victories with crippling
costs in blood, treasure, morale, and
military overexpansion. The aftermath
of Rome’s final victory over Carthage,
in 146 bc, is a reminder of the challenges
of hegemony in a newly unipolar world:
in Rome, domestic strife filled the void
opened up by the disappearance of an
external enemy, and minor threats took
on the appearance of existential dan-
N
early 3,000 years ago, according first essay. The rest of the collection
to the Old Testament, an army ranges widely, exploring the root causes
of Arameans, led by King of food shortages and investigating how
Ben-hadad, besieged the West Bank city to prevent them. One essay examines
of Samaria. Cut off from its agricultural how famines can arise from government
hinterlands, the city soon ran out of food. negligence; another highlights the impor-
In desperation, many people appear to tance of defining and understanding
have resorted to consuming barely edible famine as distinct from chronic hunger.
sources of nutrients, including “dove’s Taken together, the essays offer fresh
dung” and the scraps of flesh that they and provocative insights. The book is
could scavenge from donkeys’ skulls. uneven—some chapters will be dense
Eventually, even those grew scarce, and for a reader without a background in
the Bible recounts that the starving economics or statistics; other chapters
inhabitants of the city turned to killing are more accessible. The book does not
and eating their own children. aim to be comprehensive or to present
Such a grotesque story could be a unifying theoretical or analytic frame-
written off as the result of authorial work. Yet this new work still adds signifi-
license or historical error. But as the cant value. Ó Gráda argues persuasively
economic historian Cormac Ó Gráda that famines can result from bad data
writes in his new book, Eating People and government inaction in addition to
Is Wrong, evidence of famine-induced political malfeasance. He emphasizes
cannibalism abounds, even in the past the importance of gathering accurate
century. Separating truth from fiction information on crop yields and food
can be difficult, and narratives of canni- consumption. He also warns that aid
balism are inevitably subject to political agencies and relief organizations some-
bias, but Ó Gráda is a careful investigator, times conflate famines with the more
systemic problem of food insecurity,
DOUGLAS GOLLIN is Professor of Develop- which makes aid less effective in both
ment Economics at the University of Oxford. cases. His book is especially relevant
150 f o r e i g n a f fa i r s
Hunger Games
152 f o r e i g n a f fa i r s
believed in the power of markets to
move food from areas of surplus to
those of deficit. Thus, a conjunction
of poor data, political convenience, and
flawed theory shaped the government’s
response. Ó Gráda concludes that the
famine was “the product of the wartime
priorities of the ruling colonial elite.”
Ó Gráda paints a similar picture of the The Internship
famine during the Great Leap Forward, Program
which afflicted China from 1959 to 1961.
The Council on Foreign Relations is seek-
Blinded by misleading reports of massive ing talented individuals who are consider-
agricultural surpluses, Chinese govern- ing a career in international relations.
ment officials believed the country had Interns are recruited year-round on a semester
entered a new era of abundance. In 1958, basis to work in both the New York City and
according to the economists Gene Hsin Washington, D.C., offices. An intern’s duties
generally consist of administrative work,
Chang and Guanzhong James Wen, editing and writing, and event coordination.
Chinese leaders predicted that the
The Council considers both undergraduate
Communist Party’s economic and social and graduate students with majors in Interna-
initiatives would nearly double grain tional Relations, Political Science, Economics,
production within the year, thanks to or a related field for its internship program.
unprecedented (not to mention biologi- A regional specialization and language skills
cally impossible) crop yields. Provincial may also be required for some positions. In
addition to meeting the intellectual require-
officials, not to be outdone by rival
ments, applicants should have excellent
regions, raced to show that the produc- skills in administration, writing, and re-
tivity increases in their own regions search, and a command of word processing,
matched the national reports, producing spreadsheet applications, and the Internet.
ever more inflated statistics and obscuring To apply for an internship, please send a
the warning signs of famine. résumé and cover letter including the se-
mester, days, and times available to work
Other famines have followed a similar to the Internship Coordinator in the Hu-
pattern, and often indifference or out- man Resources Office at the address listed
right antipathy toward poor people has below. Please refer to the Council’s Web
compounded the problem. During the site for specific opportunities. The Coun-
cil is an equal opportunity employer.
Russian famine of 1891 and 1892, for
example, Leo Tolstoy wrote that elites
believed “that the masses [were] poor
because they [were] lazy and drunkards.”
No wonder the tsar’s government was so
slow to act.
Council on Foreign Relations
Human Resources Office
A DEARTH OF DATA 58 East 68th Street, New York, NY 10065
tel: 212.434 . 9400 fax: 212.434 . 9893
In some cases, the problem is simply
humanresources@cfr.org http://www.cfr.org
that the relevant data do not exist.
Some governments do not collect data
153
Douglas Gollin
that could help identify the warning ways to measure food availability
signs of famine, and many of those that indirectly, using price data, for example
do are reluctant to publicize or share (although prices can vary due to non-
the information due to political sensi- food-related factors, such as transporta-
tivities. The North Korean government, tion costs). Although new technologies—
for example, has long been reluctant such as cell phones, which can be used
to make data on hunger and starvation to survey market traders as a way to
publicly available, at least outside the spot food shortages and price spikes—
country. In India, the world’s largest offer some promise, the evidence is
democracy, the Nobel Prize–winning not yet clear on whether they can
economist Angus Deaton has pressed reliably identify production shortfalls
the government for greater transparency or food shortages.
on data and methodologies related to
the calculation of living standards and FAMINE VS. CHRONIC HUNGER
poverty levels. “My work shows how The dearth of data poses significant
important it is that independent research- challenges for governments and inter-
ers should have access to data, so that national organizations as they seek to
government statistics can be checked, gauge the scale and significance of food
and so that the democratic debate within shortages. But those players are them-
India can be informed by the different selves part of the problem. Ó Gráda
interpretations of different scholars,” points out that over the past several
Deaton wrote in an October 2015 decades, aid agencies and relief organi-
op-ed in The Hindu. But such data zations have tended to overstate the
remain highly sensitive. severity of food shortages in Africa
In other parts of the world, the dearth and have consequently conflated
of data owes less to government opacity chronic hunger and food insecurity
than to the logistical difficulty of collect- with acute crises and famines.
ing information. In many African coun- The distinction between famine and
tries, systematic data on food production chronic hunger is not merely semantic.
and availability are limited and often of Famines call for the rapid provision of
poor quality. Many countries report crop relief services and food aid; chronic
yields using crude estimates based on hunger requires longer-term invest-
isolated and anecdotal reports instead of ments in development and agricultural
deriving their figures from exact measures productivity. Citizens of rich countries
taken at harvest time from a represen- tend to be more sympathetic toward
tative sample of farms. Of course, the famine relief than toward long-term
logistical and technical capacity required development aid, Ó Gráda notes,
for such calculations should not be spurring the growth of a development
underestimated: they would necessitate industry that has financial incentives
collecting samples during the harvest to blur the distinction between the two.
from hundreds of farm plots across But fuzzy thinking has the potential
the country. to lead to bad outcomes. As Ó Gráda
In the absence of reliable data, writes, most economists believe that
famine monitoring involves finding food aid can be a valuable tool in crisis
154 f o r e i g n a f fa i r s
Hunger Games
situations and for famine relief—but To figure out how much corn is
that it can have a negative effect if it needed for the support of those who
becomes institutionalized and begins have none in this present year, and
to undercut the incentives for domestic how much corn there is in Russia,
and if there is not enough of it to go
food production.
around, to order the necessary corn
If the development industry continues from abroad,—all that is our direct
to confuse chronic hunger with famine, duty. . . .
humanitarian organizations may misal- . . . Is this really so difficult? We,
locate resources—to tragic effect. Instead who know how to figure out how
of bolstering efforts to improve agricul- many different kinds of bugs there
tural productivity or to create employment are in the world, how many microbes
opportunities outside of farming, devel- there are in a given area, how many
opment spending may go toward short- millions of versts it is to the stars,
term fixes and short-lived projects that and how many pounds of iron and
do not address the deeper, structural of oxygen there are in each star,—
causes of hunger and food insecurity. shall we not be able to figure out how
Funding for aid depends on the much people must eat in order not to
starve, and how much has been
willingness of ordinary people to spend
harvested . . . ?
money—either directly or through their
government—for the benefit of people As the world struggles to adapt to
and communities they will never directly a changing climate, and as the global
encounter. The outpouring of charitable population heads toward nine billion,
giving in rich countries in response to the need for accurate data, clearheaded
famines, natural disasters, and other crises analysis, and deep thinking about food
represents a triumph of civic morality availability and famine will increase
and a reflection of the power of commu- dramatically. Ó Gráda’s book offers a
nications technology. But this charitable sobering reminder of the importance of
impulse is fragile, as is clear from surveys making judgments based on good data
that suggest that people remain deeply and unhindered by ideological filters.∂
suspicious of foreign aid and routinely
overestimate how much their government
spends on it.
In the meantime, governments and
relief organizations must deepen their
evidence base on food production and
food availability. The challenge is not
new. In fact, Tolstoy identified it as
far back as 1892, in a report on the
Russian famine:
If our education and learning is of
any avail to us, what greater good
can it do than avert such a universal
calamity as is the present one?
L
ast December, during a debate foreign policy ended in disappointment
among the Republican candidates with the failure of his brainchild, the
for the U.S. presidency, Senator League of Nations. Yet as the post-9/11
Ted Cruz attacked the idea that the era has demonstrated—and as Cruz’s
United States should pursue regime dismissal highlighted—Wilsonianism is
change in Syria. If Washington tries to still very much alive.
topple Bashar al-Assad, Cruz warned, the The legacy of such ideas is the subject
jihadists of the self-proclaimed Islamic of Worldmaking: The Art and Science of
State (also known as isis) “will take over American Diplomacy, a fine new history
Syria, and it will worsen U.S. national of U.S. foreign policy and diplomacy
security interests.” Cruz suggested a from the late nineteenth century to
different plan: “Instead of being a Wood- the present by the British diplomatic
row Wilson democracy promoter, we historian David Milne. “U.S. foreign
ought to hunt down our enemies and kill policy is often best understood as
isis rather than creating opportunities intellectual history,” writes Milne. To
for isis to take control of new countries.” grasp the United States’ actions in the
Americans are often faulted for their world, Milne argues, it is essential to
indifference to (or ignorance of) history. understand the differing philosophies,
Yet a disparaging reference to Wilson, competing academic disciplines, and
who served as U.S. president a century varied life experiences that have in-
ago, can still score points during a formed the advice its policymakers
political campaign. have dispensed.
Milne’s book assesses the ideas and
CAMERON MUNTER is President and CEO of actions of nine thinkers, from Mahan to
the EastWest Institute and was U.S. Ambassa-
dor to Serbia from 2007 to 2009 and U.S. President Barack Obama and including
Ambassador to Pakistan from 2010 to 2012. figures such as the journalist Walter
156 f o r e i g n a f fa i r s
Diplomacy Disrupted
158
Diplomacy Disrupted
Have your people talk to my people: diplomats at the UN in New York, September 2015
unlike Wilson, he is no lover of collec- interests in the region.” Obama recog-
tive security. But he shares Wilson’s belief nizes that there is evil in the world,
that democracy is the best guarantor of citing the theologian Reinhold Niebuhr
stability. Milne describes how, even after as an influence, but argues that “we
the 9/11 attacks, Wolfowitz steadfastly should be humble and modest in our
downplayed the threat of nonstate actors belief we can eliminate those things.”
such as al Qaeda and pushed for a U.S. Here was the ultimate pragmatist:
invasion of Iraq to overthrow Saddam reason and principle would triumph
Hussein and create a new U.S. ally in over passion, ideology, and politics.
the Middle East. Just as the United But this has opened Obama up to the
States had built lasting democracies in criticism that he lacks the will to employ
Germany and Japan after World War II, U.S. power. The accusation, fair or not,
Wolfowitz argued, so, too, could Washing- sets Obama apart from everyone else in
ton create a democratic beacon in Iraq. Milne’s book: either Obama is the only
Obama has gone to great lengths to judicious character, or he is the only one
reject the ideas of Wolfowitz and other who doesn’t know how to flex American
Bush-era neoconservatives and to outline muscle. And yet even Wolfowitz cheered
MIKE SEGAR / REUTERS
a more restrained view of U.S. power. when Obama made the “gutsy” decision
In 2006, Obama stated that he would to take out Osama bin Laden. The quali-
follow “a strategy no longer driven by ties that best describe Obama—his
ideology and politics but one that is comfort with complexity, his careful
based on a realistic assessment of the examination of problems, and his ability
sobering facts on the ground and our to balance contradictions—are necessary
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Diplomacy Disrupted
W
hen Hillary Clinton’s career with bringing women from the periph-
as a lawyer first drew media ery to the center of U.S. foreign-policy
attention during the 1992 making by recognizing and institution-
presidential campaign of her husband, alizing the link between the status of
Bill Clinton, she mused that she could women and the attainment of national
have skipped law practice to stay at home security objectives.
and bake cookies. The comment led to Yet Clinton’s work remains unfinished.
a now-famous cookie bake-off between Although she managed to transform the
Clinton and Barbara Bush, which the way U.S. foreign-policy makers approach
upstart Arkansas governor’s wife handily gender issues, measured in near hind-
won. Eighteen years later, as secretary sight, Clinton’s power, political acumen,
of state in the administration of U.S. and passion for the advancement of
President Barack Obama, Clinton sup- women yielded only modest tangible
ported an ambitious effort to put energy- results abroad. Among the obstacles
efficient, environmentally friendly cook- Clinton faced were the sclerosis of the
stoves in the kitchens of 100 million poor U.S. policymaking bureaucracy and the
women around the world. “By upgrad- opposition and indifference of foreign
ing these dirty stoves, millions of governments. Perhaps most difficult
of all, however, was the challenge of
SUZANNE NOSSEL is Executive Director of
determining in which cases to push for
PEN American Center and former U.S. Deputy women’s rights, when doing so might
Assistant Secretary for International Organiza- risk angering U.S. allies and incurring
tions. She is a volunteer adviser on human rights
issues to Hillary Clinton’s presidential cam- significant political and economic costs.
paign. Follow her on Twitter @SuzanneNossel. Faced with such challenges, Hudson
162 f o r e i g n a f fa i r s
A Feminist Foreign Policy
and Leidl write, Clinton picked her for the entire world.” In her address,
battles, looking for openings to make they explain, Clinton set out principles—
progress and occasionally holding back among them, a condemnation of rape
from public advocacy to avoid derailing as a weapon of war, a call to end gender
other U.S. interests. Yet they persuasively discrimination, and a demand to stop
argue that Clinton deserves recognition violence against women—that in 2000
for making such hard calls. Hudson and helped spur the passage of the un Secu-
Leidl’s attempt to assess the impact of rity Council’s landmark Resolution 1325,
Clinton’s work to advance the status of which recognized the essential role of
women so soon after her time in office women in matters of peace and security,
is premature, but their incisive analysis realms from which they had historically
will nevertheless set a useful standard been excluded. In addition to calling on
for other scholars measuring future countries to integrate women into foreign-
progress in this relatively new area of policy making, Resolution 1325 prompted
U.S. foreign policy. journalists and activists to scrutinize
whether women were being invited to
GOING BIG IN BEIJING participate in major international meet-
Beginning in the 1970s, as the feminist ings and negotiations.
movement gained steam in the United During the administration of U.S.
States, the U.S. foreign policy establish- President Bill Clinton, Hillary Clinton,
ment gradually began to put women’s with the support of U.S. Secretary of
concerns on its agenda. Hudson and State Madeleine Albright and others,
Leidl give the administration of U.S. worked to publicize and punish sexual
President Jimmy Carter passing credit violence during the wars in the Balkans
for establishing the defense of human by drawing media attention to the brutal
rights as a foreign policy pillar and for tactics of the Serbian military and by
setting up an office dedicated to the role holding international symposiums. In
of women in development at the U.S. 2001, based on groundwork laid by
Agency for International Development Albright, the State Department inaugu-
(usaid). But the real turning point, they rated its annual Trafficking in Persons
argue, came in 1995, when Clinton, then Report, ranking countries based on their
the first lady, traveled to Beijing for the tolerance of a crime that disproportion-
United Nations’ Fourth World Confer- ately victimizes women.
ence on Women. In a speech intended The administration of U.S. President
as an implicit rebuke of the Chinese George W. Bush maintained the Office
government and its notorious denial of International Women’s Issues that
of women’s autonomy and reproductive Albright had opened at the State Depart-
freedom, Clinton declared that “human ment in 1994—an important illustration
rights are women’s rights, and women’s of how timely and reasonable policy
rights are human rights” and called for initiatives can survive major political
a future in which “every woman is treated and ideological shifts. Indeed, by the
with respect and dignity.” Hudson and beginning of Bush’s presidency, the notion
Leidl regard the speech as “a watershed that women’s well-being and interests
event for the United States and arguably could feature in U.S. national security
164 f o r e i g n a f fa i r s
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Who run the world? Clinton with Afghan women in Bonn, Germany, December 2011
Paz y Paz, the country’s first female “among the worst countries in which to
attorney general, investigated rape cases, be born female,” also posed a difficult
prosecuted the murderers of women, challenge for Clinton’s agenda: the
and attempted to hold corrupt officials country’s government enforces brutal
and drug lords accountable. Yet Paz y laws that limit the economic, political,
Paz was ousted by her political opponents and social independence of women, often
in 2014, before the end of her term, and through violence, yet Saudi Arabia is an
after dropping in 2012, crimes against important U.S. economic and military
women and girls in Guatemala rose partner. In Hard Choices, her memoir of
again in 2013 (Paz y Paz’s last full year her time at the State Department, Clinton
in office). One lasting innovation devel- describes Saudi Arabia as a place where
J. S C O T T A P P L EW H I T E / R E U T E R S
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A Feminist Foreign Policy
measurable, rapid results from devel- women’s fates are inextricably inter-
opment programs that are designed twined with those of their societies, the
to work over decades, they commit a mistreatment of women is often a harbin-
similar mistake by searching for demon- ger of authoritarianism and militancy,
strable results from Clinton’s work only and the United States’ national security
a few years after she first made women’s is enhanced when women’s well-being is
rights a U.S. priority. It is sensible to ask secured and their economic and social
how the lofty speechmaking, presidential potential are unleashed.
directives, and bureaucratic attention None of this is to suggest that Clinton
that resulted from Clinton’s leadership doesn’t deserve primary credit for raising
translated into concrete results abroad, women’s rights from a pet initiative to
but the real answers to such questions a policy issue that is taken seriously
will emerge only over time. What is across the U.S. government. But even
more, Hudson and Leidl’s term for as she seeks the presidency and pursues
Clinton’s prioritization of women’s the power to build on her earlier efforts,
rights, “the Hillary Doctrine,” seems we should remember that it will fall to
inimical to the type of long-term change her successors to determine whether
the authors hope for. For starters, it the slow and steady work of reshaping
associates the advancement of women the position of the world’s women is
abroad with a single (and not universally sustained long enough—and executed
popular) individual. And if the fate of well enough—to achieve Clinton’s
other recent “doctrines” (such as the lofty goals.∂
Powell Doctrine, which calls for the use
of overwhelming force in pursuit of
clear military objectives) is any indica-
tion, it also suggests that Clinton’s drive
to advance the status of women was
tailored to particular circumstances
and so has only fleeting utility.
Hudson and Leidl nevertheless make
the case that advancing the status of
women will require giving the issue a
permanent place on the U.S. foreign
policy agenda, one that will long outlast
Clinton. Just as environmental policy,
human rights, and nuclear nonprolifera-
tion have by now become fixed features
of the U.S. policy landscape, with State
Department bureaus of their own befit-
ting that status, so, too, should women’s
advancement take its place as an open-
ended, ever-evolving quest. Women’s
issues are worth permanent prioritization
for all the reasons that Clinton has cited:
G. John Ikenberry
Why Leaders Fight
BY MICHAEL C. HOROWITZ,
The Conceit of Humanitarian Intervention ALLAN C. STAM, AND CALI M.
BY RAJAN MENON. Oxford University ELLIS. Cambridge University Press,
Press, 2016, 256 pp. 2015, 225 pp.
I
n this contrarian book, Menon argues Leaders don’t get much attention from
that the entire “project” of humanitar- international relations scholars, who
ian intervention is deeply problematic. tend to favor abstract models and struc-
His critique is realist. Despite lots of talk tural theories that discount the person-
about international norms and human alities or experiences of decision-makers.
rights, power and interests still drive This important book brings state leaders
world politics, he asserts. The United back into debates about war and peace.
States and European countries waited Drawing on insights from historians and
three years before intervening in the psychologists, the authors find interest-
Bosnian war, and they finally did so in ing patterns in the attitudes of leaders
part because nato’s credibility was on toward risk and the use of force. The
the line. And Western powers chose book’s major contribution is its massive
not to intervene at all as humanitarian data set, which includes 2,400 leaders
disasters unfolded in Rwanda and Darfur, from around the world over the last
because they did not see their national century. The authors argue that prior
interests at stake. Menon thinks that the combat experience seems to dampen
idea of humanitarian intervention is best leaders’ enthusiasm for war. However,
seen as an artifact of the United States’ those leaders who served in the military
post–Cold War unipolar moment, when but had no direct experience of combat
Russia was in political free fall and China have been among the most likely to initi-
was only beginning its economic ascent. ate or escalate military conflict. Gender
He claims that, in reality, no international does not seem to matter, but age does:
community exists that could provide in democracies, young leaders are less
legitimacy to humanitarian interventions likely to use military force than older
and argues that such interventions rarely ones—perhaps, the authors speculate,
work anyway; they often create chaos because older leaders fear they have less
rather than stability. Despite his searching time to make their mark. The book
critique, Menon is nonetheless unwilling also documents a positive correlation
to argue that the world should simply between having a troubled childhood
turn a blind eye to genocide and mass and engaging in risk-prone behavior as
killings. So he is left asking the same an adult political leader.
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This study puts all of that aside and asks innovation and entrepreneurship thrive
the question, What does the science say? most when government gets out of the
O’Mara, who is a professor of experi- way. Mazzucato strongly challenges this
mental brain research, concludes that view, arguing that the most important
torture simply is not effective as an innovations of recent decades can virtu-
interrogation tactic. The book takes ally all be traced back to government
readers on an extended tour of the support and often to government initia-
brain and the way it functions under tive. Specifically, the advancing frontiers
the “chronic, severe, and extreme stressor of information technology, biotechnol-
states” produced by forms of torture ogy, and energy have their origins in
such as starvation, thirst, sleep depriva- government-sponsored research and
tion, and waterboarding. O’Mara looks often in direct government investment.
at the scientific literature examining The same holds true for shale gas and
the effects of these grim methods and electric automobiles, two innovations
determines that information obtained often praised as the fruits of private
using them is inherently suspect. Mean- initiative. Mazzucato concedes that some
while, people subjected to severe torture government expenditures on innovation
are likely to sustain permanent damage have been unproductive and even con-
to their brains and psychological func- demned as government waste by their
tioning. The last refuge in the defense critics. But that is hardly surprising, she
of torture has always been an appeal to counters: the absence of such mistakes
elevate pragmatism and security over would imply a lack of healthy risk taking.
ethics and the law in the face of a “tick- Mazzucato supports her thesis with
ing time bomb.” O’Mara’s book reveals numerous examples and case studies
the hollowness of that argument. and argues persuasively that a successful,
innovative society must draw on symbi-
otic partnerships between governmental
Economic, Social, and and private entities.
Environmental
Of Limits and Growth: The Rise of Global
Richard N. Cooper Sustainable Development in the Twentieth
Century
BY STEPHEN J. MACEKURA.
The Entrepreneurial State: Debunking Cambridge University Press, 2015,
Public vs. Private Sector Myths, rev. ed. 343 pp.
BY MARIANA MAZZUCATO .
PublicAffairs, 2015, 288 pp. Nongovernmental organizations (ngos)
have long been important in shaping
I
t has become fashionable, especially U.S. policy. They have become increas-
among some Americans and British, ingly important around the world as
to believe that the government that well, joining business organizations as
governs least, governs best. In particular, shapers of policy, especially but not only
according to this strain of thought, in democratic societies. This excellent
170 f o r e i g n a f fa i r s
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I
Monnet, Margaret Thatcher, and Deng n his profound, troubling, and
Xiaoping. Each was determined and deeply informative book, Kamienski
single-minded, if not monomaniacal, in investigates the relationship between
pursuit of his or her objectives. Each intoxicants and warfare. Military histori-
displayed a great mastery of details and ans have long understood the role of
enjoyed an unusual skill for organizing alcohol as a source of “Dutch courage,”
people; they were doers, not just think- but Kamienski focuses on substances
ers. It is impossible to know whether such as hashish, cocaine, and amphet-
they genuinely altered the course of amines, explaining their attraction for
history, since impersonal forces might those in combat and the dark consequences
have produced similar effects. But they of their habitual use. Drugs not only get
were first movers, and their stories and soldiers in the mood to fight but also
the immediate consequences of their help them cope with the subsequent stress.
actions are thoroughly engaging. The development of amphetamines in
the first half of the twentieth century
seemed to be an answer to the problems
of fatigue and sleep deprivation in military
forces; the drugs have proved especially
appealing for aircrew members who need
to stay awake and alert for long periods.
With official approval and encourage-
ment, the use of certain kinds of drugs
has become widespread in militaries—and
so, too, have addiction, sluggish and erratic
behavior, and even hallucinations and
paranoia. Kamienski’s rich study starts
with ancient Greece but mostly examines
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events from the last few centuries, that were being done in their name—
including the Opium Wars and the even as defeat became ever more likely?
Vietnam War, which the author dubs That is one of the most puzzling questions
“the first true pharmacological war.” of World War II, and in this enthralling
He examines how Adolf Hitler, al- book, Stargardt avoids simple answers.
though a teetotaler and a vegetarian, Not all Germans believed in Nazism
became dependent on amphetamines; (although he leaves no doubt that the
the challenge posed by drugged-up fate of the Jews was common knowledge),
child soldiers in Sri Lanka; and the nor were they all fooled by Nazi propa-
search for safe drugs to produce opti- ganda (although he offers fascinating
mum performance in combat. The insights on how Joseph Goebbels cali-
book concludes with a rumination on brated the Nazi Party’s messages to
the addictive qualities of war itself. lift morale and deflect blame away from
That theme is echoed in Pettegrew’s Hitler). Instead, Stargardt puts together
book, which considers, among other a complex portrait of a nation gripped
things, two very modern sources of by patriotism and resentment, thrilled
stimulus and addiction: readily available by early military victories, and proud
videos of actual combat (“war porn”) of the fighting skills of the Wehrmacht.
and video games that seek to replicate the Germans blamed American Jews for
sensations and demands of war. Pettegrew food shortages and ferocious Allied
examines how these technologies have bombing raids and wondered if such
affected the training and actual fighting hardships were retribution for what the
of U.S. marines. He quotes a marine in Nazis were doing to Europe’s Jews. As
Iraq in 2003: “I was just thinking one the Allies closed in, the loss of German
thing when I first drove into that ambush: life was horrific: Stargardt suggests
Grand Theft Auto: Vice City.” But in that 10,000 Germans died every day, on
Iraq, unlike in a video game, the stimulus average, during the first months of 1945.
of combat had to give way to the restraint Yet until the very end, German teenag-
of counterinsurgency: marines had to turn ers still signed up to fight.
off “the killing switch” and view Iraqis
with empathy rather than as inhuman
targets. Pettegrew’s book is filled with Agincourt
interesting and thought-provoking BY ANNE CURRY. Oxford University
material, but his analysis is on occasion Press, 2015, 256 pp.
discursive and self-indulgent.
On the first page of her excellent book
on the Battle of Agincourt, whose publi-
The German War: A Nation Under Arms, cation marked the battle’s 600th anni-
1939–1945 versary, Curry reminds readers that the
BY NICHOLAS STARGARDT. Basic encounter, at which English forces
Books, 2015, 760 pp. defeated a larger French contingent,
was not actually decisive in determining
Why did the German people stick with the course of the Hundred Years’ War.
the Nazis despite the terrible things Nevertheless, the battle has never left
W
idely sourced and compel- shopworn analogies (“another Munich,”
lingly written, The Wilderness “another Vietnam”), and professional
offers a rich and entertaining historians, some of whom, as the histo-
mix of gossip and political scheming as rian Jill Lepore has lamented, believe
it follows one of the largest candidate that “looking to the past to explain the
fields in modern history through the present falls outside the realm of serious
early stages of the 2016 U.S. presidential historical study.” The historical profession,
race. But Coppins’ real subject is the Brands, Suri, and their contributors argue
state of the Republican Party, which in this strong and stimulating volume,
174 f o r e i g n a f fa i r s
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should engage with the need of poli- district and the blighting of local political
cymakers for useful knowledge, and culture. Lewis is most successful when
policymakers should strive to develop dealing with the early years of Washing-
the kind of “historical sensibility” that ton’s history; the chapters on those years
Suri finds in Henry Kissinger. The are authoritative and fresh. As the story
volume features a mix of younger approaches the present, however, the
scholars (Brands, Suri, Jennifer Miller, book becomes less convincing. Oddly,
Michael Cotey Morgan) and senior Lewis ends with a paean to the wonders
figures such as Thomas Mahnken and of Washington’s subway system, appar-
James Steinberg. “The Nature of ently unaware of the low esteem in which
History’s Lessons,” the closing essay most D.C. residents hold it.
by Philip Zelikow, a historian who
has also served in government, is a
masterful overview of the subject that Empire of Self: A Life of Gore Vidal
both policymakers and historians BY JAY PARINI. Doubleday, 2015, 480 pp.
would do well to consult; it is a fitting
conclusion to a book that deserves a Through his historical fiction, his reviews,
close read. and his eloquent and acerbic essays on
U.S. foreign policy, Gore Vidal became a
prolific and widely read commentator on
Washington: A History of Our National City American life. Parini, a novelist who knew
BY TOM LEWIS. Basic Books, 2015, Vidal well, has written a lucid, bracing,
560 pp. and candid book that is likely to become
the definitive Vidal biography. Vidal was a
Lewis’ history of Washington, D.C., successful American who went to the Old
identifies some important continuities World and scaled the heights of its social
that have marked life in the nation’s and literary worlds. But his ambitions
capital since its establishment in the went further; he hoped to be recognized
1790s. The first is the disparity between as a major novelist and to become a
black and white. A center of the slave significant political figure in the United
trade until the Compromise of 1850 States. Parini discounts Vidal’s political
abolished the trade (but not slavery efforts; he ran for both the U.S. House
itself) in the District of Columbia, of Representatives and the Senate but was
Washington harbored slave pens, slave never elected. Parini’s critical appraisal of
ships, and slave auction houses that Vidal’s novels seems just; the best of them
horrified foreign visitors and inflamed are quite good, but none quite makes it
northern politicians and journalists. The to the first rank. But Parini is too kind
second continuity is the paradox that to Vidal’s essays on U.S. foreign policy,
the citizens of the capital of the world’s which are attractively cynical and elegantly
oldest democracy lack genuine represen- Jeffersonian in worldview but offer little
tation in Congress. The cost of that disen- to serious students of international affairs;
franchisement has been high, in terms despite their great wit and charm, they
of both Congress’ often uncaring and are unlikely to be consulted much in
sometimes racist stewardship of the days to come.
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T
has a constitutive role in their present hese two books, the first by a
forms and functions”—or that he sees noted Financial Times commen-
today’s mainstream international tator and the second by a former
relations scholars as handmaidens of British business leader and financial
an evil national security state and as regulator, challenge two pillars of
the direct descendants of their racist conventional wisdom about Europe.
predecessors of a century ago. First, they deny that the so-called euro
Scorning the notion that the postwar crisis had anything to with the euro
liberal international order represents itself. Sandbu goes so far as to view
anything particularly new or admirable, the euro as a sound currency that even
Vitalis scores a few points in noting the British should adopt. Rather, they
how long it took for some earlier social argue, the debt crisis resulted from the
and racial hierarchies, both international bad macroeconomic policy choices of
and domestic, to erode. But he refuses eu member states, namely, a focus on
to accept the fact that they have indeed fiscal austerity, high interest rates, and
eroded. One is left wanting more analy- debt repayment. Second, both authors
sis of how and why the attitudes and reject the view that the eu will need to
patterns of domination Vitalis describes establish a fiscal and economic union
gave way over time, and how the mid- to fully recover. Rather, they claim, eu
century theorists and practitioners of governments simply need to spend
the liberal international order understood more, loosen their monetary policies,
and handled the paradoxes of its halting and restructure their debts. This would
and inconsistent implementation. be good news for Europe, because the
gideon rose solution would be so simple, even pleas-
ant, to implement. It would be bad news
for utopian technocrats in Brussels, who
for five years have tried to convince
everyone that the only solution to the
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and, for better or worse, completely on explaining away the powerful Euro-
overhauling the British economy. And pean Central Bank and on a blanket
she was lucky, as every successful politi- assertion that the eu is in disequilib-
cian must be, waging and winning the rium and might change. Yet this book
Falklands War and thus transforming a bears close reading as an effort to return
prime ministership whose days seemed theories of European integration to the
numbered into one of the postwar United debate about the eu’s future.
Kingdom’s longest. In the end, however,
she could not escape the fate of so many
powerful leaders: the narrowing of vision, Genoa, “La Superba”: The Rise and Fall of
and ultimately paranoia, that comes from a Merchant Pirate Superpower
relying on ever-fewer close advisers. BY NICHOLAS WALTON. Oxford
University Press, 2015, 256 pp.
I
n what amounts to a searing, self-
inclusive indictment of the interna- “You can get it if you really want,” the
tional donor community—official Jamaican reggae singer Jimmy Cliff
lenders as well as private nonprofits— exhorted listeners in his 1970 song by
this remarkably frank and disturbing that title. To judge from Bernal’s mem-
World Bank report paints a bleak oir, Jamaicans have taken that message
picture of Haiti today. Between 1971 to heart. Bernal, a former Jamaican
and 2013, despite massive foreign ambassador to the United States, makes
assistance, Haiti’s per capita income fell the case that despite being a small,
by 0.7 percent every year, on average, geopolitically irrelevant island, Jamaica
owing to low growth and to a popula- has often had its way with its much
tion explosion. Nearly 60 percent of more powerful neighbor. He recounts
Haitians still cannot meet their basic how during his tenure in the 1990s,
needs. In pinpointing causes, the authors on issues such as trade preferences,
fault Haitian business elites for not foreign aid, debt relief, and counter-
paying taxes and for taking part in narcotics, Jamaica succeeded in moving
anticompetitive practices. Despite an Washington closer to Jamaican prefer-
abundance of technical assistance from ences by building a constituency of
international institutions, Haiti’s legal Jamaican American immigrants and
and regulatory frameworks are “dys- influential Americans from Jamaican
functional,” the country suffers from a families, such as Colin Powell and
“near total absence” of urban planning, Harry Belafonte. Jamaican diplomats
and the government still cannot perform also knew how to work the interagency
many basic functions. Fundamentally, process within the remarkably acces-
“a social contract is missing between sible U.S. executive branch, knock on
the State and its citizens.” And the the right doors in Congress (despite
future looks grim: the study warns of the “astonishing” ignorance of world
the dangers of rising urban violence affairs found on Capitol Hill), and
among disaffected, undereducated youth. network with think tanks and other
Nevertheless, the report concludes with policy entrepreneurs. Bernal also
a number of promising policy proposals, emphasizes the importance of doing
which must be undertaken simultane- one’s homework, building trust with
ously to be effective: maintaining important policy players, and identifying
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A
tributed from 1930 to 2008. He care- mericans, many of whom
fully distinguishes between three types descend from the 50 million
of land reform: radical redistribution eastern Europeans who came
without compensation; land negotiation to North and South America from the
with market-based compensation; and mid-nineteenth century to the mid-
colonization, whereby state lands are twentieth century, cherish the simple,
transferred to settlers. Drawing on a heartening idea that nearly all those
large database of comparative cases and immigrants fled persecution or hard-
well-focused country studies (mostly, ship and shared in the American dream.
but not exclusively, from Latin Amer- Zahra, in wave after wave of detail,
ica), Albertus concludes that radical makes plain that the story is not so
redistribution—his main interest—is simple. Many who came found the
most likely to occur when divisions New World harsh, unwelcoming, and
exist between national elites and few alien, and a third of them returned
institutional constraints prevent the home, even though during the late
adoption of the policy. Albertus also nineteenth century, many European
contends that land reforms that perma- governments sought to rid their societies
nently redistribute assets can be more of minorities and “undesirables”—in
effective than progressive taxes in the Russian case, 2.7 million Jews and
correcting inequalities in wealth and Polish and German speakers. Other
power. One surprising finding of his countries fought against emigration as
challenges much of the established a threat to their national projects. By
literature on this subject: radical land the turn of the century, however, some
reform is more likely in an autocracy, governments and nationalist move-
where power is concentrated, than in ments sought to aid their kinsmen in
a democracy, where vested interests foreign lands or saw them as the spear
enjoy many channels through which of colonizing efforts, at least in Latin
they can stymie reform. America. Zahra handles this immensely
complicated and multidimensional
history with remarkable clarity
and feeling.
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In Europe’s Shadow: Two Cold Wars and a Trafficking Justice: How Russian Police
Thirty-Year Journey Through Romania and Enforce New Laws, From Crime to
Beyond Courtroom
BY ROBERT D. KAPLAN. Random BY LAUREN A. M C CARTHY. Cornell
House, 2016, 336 pp. University Press, 2015, 304 pp.
the subject on an altogether more subtle web of issues that Douglas untangles with
and thoughtful basis. They often disagree, exceptional skill. These begin with the
particularly with Andranik Migranyan’s challenge posed to legal systems by the
opening argument that in Russia, only immensity of the Holocaust, a crime that
an authoritarian regime can create the no punishment could requite. Ideally,
order needed to build democracy. But Douglas argues, atrocity trials should act
their arguments with one another probe as “didactic exercises.” Demjanjuk’s 1987
the genuinely complicated issues of how trial in Israel failed that test; his convic-
democratic or authoritarian Vladimir tion was overturned because the Israeli
Putin’s Russia has become, the likely prosecutors had wrongly identified him
direction the country will take, and how as a particularly monstrous figure from
Russia stacks up against the realities (as the Treblinka death camp. The book is a
opposed to the self-images) of democra- tour de force owing to Douglas’ piercing
cies, including the United States. Some analysis of all the legal complexities:
of the arguments center on chicken-or- denationalization (which was the limited
egg questions: Which comes first, a recourse the United States sought in
strong state as a prerequisite for democ- Demjanjuk’s case), the impact of the Cold
racy or progress toward democracy as War on this and other trials, and, above
the prerequisite for an effective state? all, the hopeless inadequacy of German
A number of essays also explore Russia’s law, which was partially redressed by the
political trajectory: Is the current system court’s innovations in prosecuting the
simply a stage in an ongoing evolution— Demjanjuk case.
and if so, toward what? Or is it a rela-
tively stable endpoint? Above all, the
book forces the reader to ponder not Imperial Gamble: Putin, Ukraine, and the
merely Russia’s political course but New Cold War
also the idea of democracy itself. BY MARVIN KALB. Brookings
Institution Press, 2015, 230 pp.
The Right Wrong Man: John Demjanjuk Kalb, a veteran television journalist, does
and the Last Great Nazi War Crimes Trial here what he does best, placing the details
BY LAWRENCE DOUGLAS. Princeton of the crisis over Ukraine in a broader
University Press, 2016, 352 pp. political and historical context, allowing
his book to flow like a well-crafted docu-
John Demjanjuk was a Ukrainian con- mentary. The story and its telling are at
centration camp guard who, after the once accessible and biting. And although
war, made his way to Ohio. Thirty years he covers a great deal of history, the
later, he was discovered and prosecuted historical details are not merely decora-
in the United States, Israel, and, ultimately, tion but vital to his analysis. He feels
Germany. He died before he could appeal no tenderness toward Russian President
a five-year German prison sentence for Vladimir Putin, nor does he condone
the crime of “accessory to the murder of what Putin and his country have done
at least 28,060 Jews at the Sobibor death in Ukraine. But mindful of the deep and
camp.” Behind this story lies a fraught complex history of Russia’s relationship
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with Ukraine and the stakes Russia has in (also known as isis) later began to pitch
the outcome of the current impasse, he its international jihadism to the region’s
underscores in blunt and unsentimental youth. Today, northern Lebanon repre-
terms how Russia, for all its failings and sents a vital strategic arena for the pro-
vulnerabilities, still holds the upper hand. tagonists in Syria’s civil war. Control of
Any deal struck to end the crisis should be the Tripoli-Qalamoun-Qusayr corridor
between Russia and Ukraine alone and will is existentially important for the alliance
have to hew more closely to Russia’s terms formed by Syrian President Bashar
than to those of Ukraine or its well-wishers al-Assad, Hezbollah, and Iran and also
in western Europe and the United States. crucial for the Sunni jihadist groups that
seek to overthrow Assad. The struggle for
control has produced a crucible of political
Middle East intrigue and religious zealotry. Through-
out the region, this Sunni-Shiite rivalry
John Waterbury is unfolding with equal viciousness.
R
ougier masterfully guides readers since the fall of the Qajar dynasty in 1921,
deep into the complex terrain of with a heavy emphasis on the years since
northern Lebanese politics. It is a the Iranian Revolution of 1979. She begins
wondrous, if difficult, voyage. He argues with an unsurprising premise: economic
that the convoluted politics of the Sunni- crises have driven Iranian politics. Inflation
dominated northern part of the country helped bring down the shah; the unravel-
and its capital city, Tripoli, serve as a ing of the economy during the Iran-Iraq
paradigm for the plight of Sunnis through- War brought in a “pragmatic” president,
out the Levant. In 1982, during the Ali Akbar Hashemi Rafsanjani; and
Lebanese civil war, Syria asserted control economic mismanagement under
over the region, but it withdrew its forces Mahmoud Ahmadinejad, combined
in 2005 after the assassination of Lebanon’s with effective international sanctions,
Sunni prime minister, Rafiq Hariri. Soon set the stage for the election of President
thereafter, Hariri’s son Saad tried to assert Hassan Rouhani in 2013. Maloney
what Rougier calls “institutional” Sunni stresses the constant tussle pitting
control over the north but was humiliated redistributionists in the parliament,
when the Shiite militant group Hezbollah who have been a thorn in the side of
took over several neighborhoods in West every Iranian president, against the
Beirut in 2008. In the absence of strong more economically orthodox Guardian
Sunni political leadership, hard-line Salafi Council. Two important takeaways
sheiks filled the void, and the Islamic State emerge from her analysis: the Islamic
Republic is surprisingly plural, although Gulf Security and the U.S. Military:
not democratic, and remarkably resilient. Regime Survival and the Politics of Basing
After the revolution, gdp dropped by 32 BY GEOF F REY F. GRESH. Stanford
percent, three million skilled Iranians left University Press, 2015, 280 pp.
the country, three million Afghan refugees
came in, and Iraq initiated an eight-year The United States maintains more than
war with devastating consequences. 2,000 military bases or installations in
Subsequent decades have not been much other countries. What determines
kinder, but the regime has survived. whether those countries agree to host
them? Gresh seeks to answer this ques-
tion by focusing on a half century of
ISIS: Inside the Army of Terror negotiations that Bahrain, Oman, and
BY MICHAEL WEISS AND HASSAN Saudi Arabia—all of which host U.S.
HASSAN. Regan Arts, 2015, 288 pp. forces—have conducted with the United
States. Gresh argues that if a foreign
Weiss and Hassan capture the complexity government perceives internal security
of the Iraqi and Syrian imbroglios that threats as paramount, it will be reluctant
gave rise to the Islamic State (or isis) to host U.S. bases. But when external
in this thorough and accessible book. security threats prevail, governments
Isis resulted from a merger of sorts will tolerate (and even welcome) the
between remnants of Iraqi President presence of American forces. His analy-
Saddam Hussein’s Baathist regime and sis does not sufficiently address the fact
followers of the Shiite-hating Jordanian that some threats are both internal and
jihadist Abu Musab al-Zarqawi. The external: consider, for example, Iran’s
authors suggest that isis’ ability to support for Shiite minorities in the Gulf
control territory, gather intelligence, Arab kingdoms and Yemen. Gresh also
and smuggle oil stems mainly from the does not explore the dilemmas faced by
experience and know-how of the former Washington caused by establishing U.S.
Baathists. After a revolt broke out in bases in places such as Bahrain, where
Syria in 2011, the beleaguered president, repressive regimes abuse segments of
Bashar al-Assad, abetted isis’ spread and their own populations—perhaps because
even cut deals with the group in order to that kind of political liability does not
bolster his claim that his enemies were seem to trouble the American electorate.
irredeemable terrorists. While the book
does not alter the consensus narrative of
the rise of isis, it does provide fascinat- Sponsoring Sufism: How Governments
ing details about the 2007 anti-jihadist Promote “Mystical Islam” in Their
Sunni uprising in Iraq and about jihadist Domestic and Foreign Policies
groups’ use of U.S. prisons as recruiting BY FAIT MUEDINI. Palgrave
grounds. In this portrait, isis emerges Macmillan, 2015, 232 pp.
as a strategic organization playing a
long game; counterterrorist raids and This book does not do justice to its
bombing runs will not defeat it. important subject. Muedini focuses on
the political uses of Sufism in Algeria,
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P
akistan is torn by many forces: society under Mao was turbulent in
feuding ethnolinguistic groups, many of the same ways it is today. The
warring political parties domi- most interesting chapters in this volume
nated by the rival Bhutto and Sharif describe young people trying but failing
families, competing military and civilian to internalize official ideology, local party
power centers, and sectarian rifts. cadres ignoring orders to ban community
rituals, and millenarian religious sects The Oxford Handbook of Indian Foreign Policy
and ethnic uprisings boiling under the EDITED BY DAVID M. MALONE,
surface of Maoist homogeneity. But C. RAJA MOHAN, AND SRINATH
these new insights do not contradict RAGHAVAN . Oxford University Press,
the established view that Mao’s regime 2015, 700 pp.
exercised a terrifying degree of surveil-
lance and control. As India has become more engaged in
the global economy and faced strategic
competition from China, it has tried to
Divided We Govern: Coalition Politics in strengthen its relations with countries in
Modern India East Asia, Southeast Asia, and the Middle
BY SANJAY RUPARELIA. Oxford East and to improve its ties with major
University Press, 2015, 480 pp. powers. But as this collection of concise
and authoritative essays shows, New Delhi
A secular, left-leaning “third force” has has been unable to establish the close ties
long struggled to cultivate the political with its immediate neighbors that would
space between the upper-caste-based provide a steppingstone for exerting
Congress party, which ruled India for significant influence farther away. Nor
most of its history as an independent does it engage effectively with interna-
country, and the Hindu nationalist tional institutions in the areas of trade,
movement, whose party controls the finance, arms control, or climate change.
government today. But the left has The country’s policymaking apparatus is
constantly splintered along ideological, dysfunctional. The foreign ministry is
caste, and regional lines. On the three understaffed and works without significant
occasions when it came to power, it oversight from political parties, parlia-
ruled in coalition governments that held ment, the business community, media,
together for less than a full parliamentary or academia. The military lacks strategic
term each. Ruparelia notes the achieve- direction from the civilian authorities, and
ments of the leftist-led governments but its service branches barely coordinate with
pays special attention to their factious one another. The nuclear weapons pro-
politics, which he attributes partly to gram runs on autopilot, and the domestic
poor political judgment and partly to arms agency has failed to produce high-
India’s “federal party system,” in which end indigenous weapons. Covering all
large, ethnolinguistically defined states these topics, the book opens up many
spawn distinctive political subsystems fascinating areas for future research.
that are shaped by local, rather than
national, cleavages. His analysis explains
the dynamics of the leftist coalitions but An Economist in the Real World: The Art
does not make clear how they differed of Policymaking in India
from the other coalition governments BY KAUSHIK BASU. MIT Press, 2015,
that have led India since 1989, some of 256 pp.
which did serve full terms.
This book offers fewer anecdotes about
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the politics of policymaking than one from the Somali civil war began to settle
would expect given its title. But Basu, in Lewiston, Maine, a short distance
who was the chief economic adviser to from Colby College, where Besteman
the government of India under Prime had become a professor of anthropology.
Minister Manmohan Singh from 2009 to Amazingly, a number of the refugees
2012 (and who is now chief economist of were from Banta, and Besteman was able
the World Bank), provides lucid discus- to reconnect with them. This remarkable
sions, suitable even for non-economists, book is the product of that coincidence.
of issues as varied as inflation manage- It presents a vivid account of Somalis
ment, taxes, and poverty alleviation. who survived their village’s collapse into
His main argument is that simplistic ethnic violence and escaped by foot to
policies produce unintended conse- Kenya, where they spent a decade in a
quences as market actors respond in dreadful refugee camp. Some were then
their own ways to new incentives. But lucky enough to be accepted for resettle-
he argues that India in recent decades ment in the United States. Many of those
has gotten economic policy more right were sent to Lewiston, where their
than wrong. The country’s initial “costly attempts to make a new life were some-
investment” in democracy has paid times undermined by a careless U.S.
dividends by generating an inclusive bureaucracy, their own poverty and lack
policymaking process, which may be of education, and discomfort among
unwieldy but maintains social stability locals grappling with the unexpected
even in the midst of profound change. influx of several thousand illiterate
He believes that if Indian governments Africans into their small New England
put a few more smart reforms in place, town. Besteman eschews social science
the country can enter a “high-growth jargon to tell her story with great insight
path” that will continue for decades. and empathy. Her book should be
required reading for policymakers
currently debating what to do with
Africa refugees from Syria.
A
s a doctoral student in the late more likely to demand that govern-
1980s, Besteman spent two ments respond better to their needs.
years in Banta, a small village Yet as Prichard notes, the actual details
in southern Somalia. In a curious turn of this bargain have rarely been care-
of events, over a decade later, refugees fully documented. This finely crafted
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192 f o r e i g n a f fa i r s
Letters to the Editor
sais-jhu.edu/summer
Washington, DC